Children's services in Reading have "improved in most areas", inspectors say.
Reading Borough Council's children's services - rated inadequate in 2016 - now "require improvement to be good", Ofsted said.
The council said it hoped the changes would "translate into better life outcomes for vulnerable children".
Three years ago, the authority was ordered by the government to set up a new company to run children's services.
Under that company - Brighter Futures for Children - caseloads are reducing, a report said.
Inspectors praised early help services for "continuing to provide well-targeted interventions", and working to reduce the number of referrals to children's social care.
Although staff recruitment and retention has improved, Ofsted found that progress was still hampered by "frequent changes" in the senior leadership team, and a "high turnover of frontline staff".
The report recommended improvements in stability of the workforce, the involvement of police in child protection and the quality of provision for privately fostered children and 16 and 17-year-olds at risk of homelessness.
Cllr Liz Terry, lead councillor for children's services, said: "We are delighted that Ofsted has recognised the huge efforts being made to help turn children's services around in Reading.
"The important thing now is for that recognition to translate into better life outcomes for vulnerable children, young people and families in the town."
She said "challenges remain" and the council would continue to work with BFfC to make further improvements.