The report of the Physical Education and School Sport Task Force, set up by the National Assembly for Wales, found "levels of fitness among young people are a cause for concern". The report also recommends that all schoolchildren in Wales should spend at least two hours of curriculum time each week in PE lessons.
Sports leaders have long campaigned for a guaranteed two hours of PE per week to be included in the school timetable. However, the former Department for Education and Employment in England resisted pressure from successive sports ministers and instead promised pupils two hours of exercise inside or outside the school day.
A spokesperson for the Welsh Assembly said that the task force's proposals will be consulted upon before any decision is made about curriculum time.
Standards of PE in primar schools have fallen in the past three years and standards in secondaries have fallen in the past two, the task force said. And the fact that some primary teachers finish their initial training without having taught PE is another cause for concern.
Jane Davidson, minister for education and lifelong learning in Wales, said pound;500,000 would be made available this year for continuing professional development programmes for teachers and to establish curriculum development centres to identify and spread good practice.
The programmes will be targeted at primary school teachers but will not be compulsory. A national school sports co-ordinator will be appointed to oversee the reforms Task force members included representatives of local education authorities, the sports council for Wales and civil servants, as well as teachers and heads.
Graham Henry, coach of the Welsh rugby union team also helped prepare the report.