Education Minister Leighton Andrews said a task force led by Neath Port Talbot council will be brought in.
Blaenau Gwent, which accepted change was needed, must now provide an immediate action plan for its 34 schools.
Mr Andrews said the shortcomings are "quite simply unacceptable".
"Scrutiny of education by elected members has too often been undermined by political point scoring.
"This has meant education officers and head teachers have not been held accountable for poor performance, effectively letting them off the hook.
Stood down
Continue reading the main storyThere can be no excuses for letting children and young people down this badly”End Quote Leighton Andrews Education Minister "Much of Blaenau Gwent is of course severely deprived. That means that a small council faces significant challenges across all of the services it provides, " Mr Andrews said.
"But that cannot be an excuse - there can be no excuses for letting children and young people down this badly"
Blaenau Gwent's executive member for education Stephen Bard has stood down.
According to Estyn an authority is placed in special measures when it fails to give pupils an acceptable standard of education, and the people responsible for leading, managing or governing it do not have the ability to make the necessary improvements.
Estyn's report found that children and young people in Blaenau Gwent "do not make good progress" and that standards "are well below what is expected".
Continue reading the main storyThe authority should:
Raise skills levels and secure better outcomes for learners at all key stages and in the youth support serviceChallenge schools more robustly and provide prioritised support for schools according to needIdentify and challenge under performance in schoolsEvaluate the effectiveness of provision both within the education service and across partnerships serving children and young peopleIncrease pupil attendance rates in all schoolsSecure sustainable improvements in the percentage of post 16 learners in full time education, training or employmentImprove scrutiny of the council executive to account for the performance of local authority services and hold head teachers to account for the performance of individual schoolsImprove provision for learners with additional learning needsSource: Estyn reportSupport for school improvement and additional learning needs was unsatisfactory, the report found.Estyn found the authority had unsatisfactory prospects for improvement because senior officers and elected members of successive administrations had provided unsatisfactory leadership.
Managers did not evaluate the impact of initiatives or target resources to learners with the greatest need, and leaders and managers had a track record of "slow and incomplete" responses to recommendations from successive Estyn inspection reports.
It the first Welsh council to receive an overall "unsatisfactory" judgment since Estyn introduced a new inspection regime last year.
Dr Philip Dixon of the Association of Teachers and Lecturers (ATL) said the report made "disturbing reading".
Clear direction
"We are talking about the futures of the children in one of the most deprived parts of Wales," he said.
"The local authority is obviously too small to deliver effectively and the report is another filip for those who want to see education delivered on a more effective consortia basis.
"It also shows the catastrophic effects of long term failures in political leadership, and an apparently revolving door in regard to senior management."However, Dr Dixon said the report also raised more questions than it answered as Welsh Government data recently showed Blaenau Gwent was the third best performing authority in Wales in terms of "value added".
Blaenau Gwent leader Des Hillman said the council was already working with other authorities to raise standards.
He said: "Progress has not been as fast as we want, and more needs to be done.
"The tough decisions we have already taken mirror the clear direction set by the education minister and the Welsh Government's policy directives but clearly we need to do more.
Denbighshire was placed under special measures in 2007 under a previous Estyn framework.
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