England's exams regulator, Ofqual, has refused to order exam boards to regrade this summer's English GCSE in a row over this year's results.
It acknowledged grade boundaries had changed part way through the year, but stood by the new June grading system.
Instead of regrading, pupils would be offered early resits in November, Ofqual said.
Head teachers' union, ASCL, said the move was wholly unacceptable and is threatening legal action.
Head teachers urged Ofqual to investigate when it was revealed that grade boundaries for the exams changed between January and June.
Heads claim those who sat the exam in June were put at an unfair disadvantage over those who sat them earlier in the year.
The Association of School and College Leaders' general secretary Brian Lightman said: "What is clear to us is that there has been a systemic failure over the awarding of English GCSE grades."
He added: "Teachers and students acted in good faith, followed advice and feedback from the awarding bodies during the year, and worked to the approximate grade boundaries given to them.
"They accept that grade boundaries can change by a couple of marks, but to change by 10 or more makes a mockery of the system."
Many pupils who had been expecting a crucial C grade were given a D as a result of the grade boundary changes. This means many will be denied college places.
Ofqual chief executive Glenys Stacey said she had looked carefully at how the exam boards had managed the awarding of all GCSE qualifications this year.
She said: "People were particularly concerned about the June grade boundaries.
"We have found that examiners acted properly, and set the boundaries using their best professional judgement, taking into account all of the evidence available to them.
"The June boundaries have been properly set, and candidates' work properly graded.
"The issue is not the June, but the January boundaries. Again, examiners used their best judgement in setting these boundaries, but they had less data and information to work with."
This was partly because fewer candidates sat the exam in January. Some 7% sat the unit causing concern in January, compared with 93% in June.
And because the exams were new qualifications, examiners could not rely so much on direct comparisons with the past, Ms Stacey added.
"As a result, those grade boundaries were set generously," she said.
Ofqual had thought carefully about what should be done, Ms Stacey said, adding that its job was to ensure grades were comparable from one year to the next.
The exam boards recognised the strength of feeling, she said, and would be offering early resits for students who sat the June units.
Andrew Hall, chief executive of the AQA board, which was responsible for one of the GCSEs at the centre of the row, said there were lessons to be learned.
"A lot of the focus has been on AQA, which is understandable, because our English qualifications are taken by nearly 60% of students.
"While I was confident that AQA had maintained standards, it is reassuring that the regulator's review has confirmed that we followed the correct procedures and awarded the right grades."
Exam board Edexcel said: "Although the report confirms that grades issued in the summer were fair, we sympathise with the disappointment many are feeling."
She added that re-sits would be offered free of charge.
But Russell Hobby, general secretary of the National Association of Head Teachers, said: "The gravity of this situation cannot be overestimated.
"The fact of the matter is that next week, students and teachers will return to school for the new academic year with some students having had their college places, their jobs - and their futures - put in jeopardy. At the moment, there is no answer to this very pressing problem."
Shadow education secretary Stephen Twigg said Ofqual does not address the fact that pupils in the same year, who received the same marks, were awarded different grades.
"As a result, thousands of pupils have been done a disservice at a time when they are making big decisions about their futures."
GCSE English grades at A* to C fell by 1.5%, but some schools saw much bigger falls.
Overall, this year's GCSE results showed the first fall in the A* to C grades since they were introduced.
All exam boards had been warned to guard against grade inflation by Ofqual prior to marking.