The Office for Standards in Education report also said that many teachers of vocational subjects lacked relevant business experience and there were few opportunities to help them obtain it.
The report comes amid growing fears that not enough vocational teachers are being trained. Universities have taken up just 245 of the 300 Teacher Training Agency funded places available for teacher training in vocational GCSEs.
The universities are sometimes reluctant to take on trainees in vocational subjects because of the difficulties in finding school placements and qualified staff to teach students.
Peter Gilroy, former chairman of the Universities Council for the Education of Teachers, said: "You cannot recruit students unless you have the school placements."
Professor Alan Smithers, director of the education and employment centre at Liverpool university, pointed to another difficulty: vocational GCSE subjects often cover broad areas such as "manufacturing" rather than specific professions; this makes it hard to see which jobs potential teachers should come from.
The Ofsted report, Developing New Vocational Pathways, follows last week's GCSE results which showed a record number of students achieving the top A or A* grades - but a rise in U grades.
David Miliband, school standards minister, has said GCSEs need to become more relevant to the 30,000-plus youngsters who leave school without any qualifications. Putting more emphasis on the vocational is seen as a way of improving Britain's school drop-out rate at age 16.
Eight vocational GCSE subjects were introduced in 2002. New subjects include leisure and tourism and engineering. The exams replace the current GNVQ part one, and are worth two conventional GCSEs. GNVQs proved popular this year, with entries for intermediate part one courses almost doubling from 38,299 to 75,663.
Ofsted visited 93 schools and found good teaching in two-fifths of vocational lessons, a similar proportion to academic GCSEs. Pupils'
achievement was unsatisfactory in a quarter of lessons.
The relatively poor performance of vocational pupils seems to be down to their lower ability rather than teaching quality. In fact Ofsted said standards of achievement were satisfactory given pupils' prior attainment and in a few cases, such as business and information technology, good.
But inspectors said students needed better hands-on experience to complement classroom work: "A key aspiration for the new courses is that schools should provide a strong vocational dimension to teaching and learning. This is plainly not happening sufficiently and unless this is addressed urgently pupils' initial perceptions of their relevance may well weaken as the courses progress." They urged schools to build better links with firms to improve work experience.