Too many young people in England drop out of sixth-form or college and are not being given the chances that will help them in future, Ofsted is warning.
High numbers of youngsters are "not well served" by their courses, it says.
Inspectors say it is "simply not enough" to keep teenagers in education until 18 if they fail to leave with decent qualifications and experience.
Instead, this will delay an "inevitable fall" into becoming "Neet" - not in education, employment or training.
Figures show that nearly 1.18 million 16 to 24-year-olds are classed as Neets and in addition to this, the number of people whose whereabouts are unknown is rising, inspectors said.
The education inspectorate's annual report on further education (FE) and skills said "too many learners were not progressing from their prior attainment to a higher level of study to meet educational and career aspirations".
The Ofsted research warns:
- too many education providers are not ensuring their programmes meet the needs of learners
- too much teaching of English and mathematics is not good enough
- too few students progress to an apprenticeship, employment or higher levels of learning
- too much careers guidance is weak, not giving teenagers a clear idea of the paths available to them.
It says providers and employers should work together to ensure that their education and training leads to secure employment.
The report urges the government to ensure there is a reliable system for tracking young people as they move between different types of education and training.
It says local councils should be given powers to make sure they are given full information by schools, academies and colleges on youngsters who drop out of their studies.
Speaking as the report was published, Ofsted chief inspector Sir Michael Wilshaw said the principle behind new rules requiring young people to stay in education and training was "undoubtedly a good one".
But he warned: "The gap between the good intentions of government policy in relation to this age group and the reality of what is happening on the ground is worryingly wide.
"The simple truth of what's happening at the moment is that too many of our young people, particularly those from disadvantaged backgrounds and those who want to follow vocational pathways, are not yet being well served by these programmes.
"As chief inspector, I am very concerned that too many young people drop out of their post-16 education and training course at too early a stage. Too many of these young people who do drop out simply disappear from the educational radar and are not properly tracked by the local authorities."
Lorna Fitzjohn, Ofsted's director for further education and skills, added: "It is simply not enough to keep young people in education and training longer if they still fail to gain meaningful qualifications and experience that will help them achieve their career goals.
"Instead, all this will do for many is delay their inevitable fall into the Neet category."
The Ofsted report comes a year after new funding scheme was introduced for FE in England.
Since September 2013, colleges have been funded for students' programme of study rather than by the individual qualifications taken. A programme of study includes qualifications, maths and English study and work experience.
'Low Neet rate'
Gill Clipson, deputy chief executive of the Association of Colleges, said: "The move to programmes of study and away from colleges being funded by qualification is a fundamental change.
"So too is the requirement for all young people to continue to study maths and English if they have not reached an acceptable standard at school.
"The intention is right but, as this is such a fundamental change, it is not surprising that there has been variable implementation particularly since the Ofsted fieldwork for this report took place even before the first full year of implementation was complete."
A Department for Education spokeswoman said: "The number of young people Neet is at its lowest level since consistent records began.
"And it is encouraging that this report by Ofsted shows our plan for post-16 education is already having a positive impact just two terms after coming into effect.
"The report shows positive early signs that schools and colleges are entering young people for more rigorous qualifications.
"In fact, the latest figures show that the numbers of those over the age of 17 taking GCSEs in English and maths are rising, giving thousands more the vital knowledge and skills demanded by employers."