Schools should be given greater autonomy including the power to spend their budgets "without strings attached", according to a report on the future of Scottish education.
The independent Commission on School Reform has advocated a move away from a uniform approach towards greater diversity, with more decisions taken at local level.
Fundamental changes are needed to empower schools and better serve pupils from disadvantaged backgrounds, said the commission, which has just published its final report By Diverse Means: Improving Scottish education.
It recommends a shift in the role of local authorities which, in many cases, are too involved with the day-to-day management of schools, the commission said.
Such a shift could give headteachers greater control over a range of areas including leverage to recruit and retain talented teachers to work in deprived areas by offering financial incentives.
The commission, chaired by educationalist Keir Bloomer, was set up in 2011 by the think tanks Reform Scotland and the Centre for Scottish Public Policy.
It has produced 37 recommendations covering areas such as continued development of the Curriculum for Excellence, targeted support for pupils and schools experiencing disadvantage, a centre dedicated to improving education outcomes in deprived areas and greater autonomy at school level.
The changes are needed to address "deep-seated problems" with the schooling system which have developed over decades, Mr Bloomer said.
"There is an assumption in Scotland that our education system in Scotland has always been and is now among the world's best. There may have been a time when that was true but unfortunately it is not true now," he said.
"Scotland's schools do an excellent job. The standard of education they provide is high and it is remarkably consistent across the country. But they are no longer world leading. If we want to be back again in the position of being the world's best then there is no alternative but to make some quite significant changes."