Black pupils are routinely punished more harshly, praised less and told off more often in English schools than other pupils, an official report says.
It says the staff in many schools are "unwittingly" racist, with black youngsters three times more likely than white to be expelled permanently.
It describes this as an "iconic issue" for black Caribbean communities.
The Department for Education and Skills said using "the R-word" was unhelpful, but it is to issue new guidance.
The report - Getting it. Getting it right - had advocated a focus on the 100 schools with "disproportionately high" exclusions of black pupils.
A DfES spokesperson said the numbers involved in any one institution were small so it was hard to draw general conclusions about which interventions would work or not.
"We are not making any suggestion at all that this would equate to a list of 'the schools where black Caribbean pupils are most likely to be excluded'," she said.
But it is going to target support to schools and local authorities felt to need it most.
The report stemmed from a "priority review" involving officials, head teachers and others, headed by the department's director of school performance and reform, Peter Wanless.
It was completed last September and leaked to a newspaper but has only now been published, as questions were being asked about its continued non-appearance.
It says every year 1,000 black pupils are permanently excluded and nearly 30,000 suspended.
It describes this as an "iconic issue" for those of black Caribbean heritage.
"Exclusions are to education what stop-and-search is to criminal justice", it says.
A key factor is "the marginal status of race equality" as "important but somebody else's problem and politically correct nonsense".
The response to race equality legislation by many schools, local authorities and even part of the department itself "has ranged from grudging minimum compliance to open hostility".'Using the R-word'
The review considered two strands of thought.
One argument holds that "largely unwitting, but systematic, racial discrimination" means staff expect black pupils to behave worse.
The other argument is that black pupils, especially boys, are subject to outside influences and cultural stereotypes that cause them to behave more aggressively in school.
The report favours making schools the focus. It says they can be categorised broadly as those that "get it" and those that "don't get it".
"The main barrier to an effective closing of the exclusions gap is the need to engage the co-operation of those schools who have not 'got it' yet."
The report highlights - in bold, in a red box - what it calls a "key decision: using the R-word".
"Properly understood, Institutional Racism is not such a 'scary' thing for an institution to admit to," it says.
But it is "highly charged" and the department must decide whether to use it in its guidance or something "that has less inflammatory potential" but might be less "challenging".
The DfES spokesperson said: "It is hard to see how using this label would help schools and local authorities to take intelligent action to tackle the issue."
The report says the schools inspectorate, Ofsted, has not been "robust" enough with schools but has expressed a willingness to do more.
There needs to be a "nuclear deterrent" for those that have consistently failed to tackle their exclusions gaps, it says.
But it accepts that the sort of special measures used for educational failure would never be invoked just on this issue.
Instead the Commission for Racial Equality might issue a compliance notice under the Race Relations Act, it suggests.
Schools Minister Jim Knight said: "We want to ensure that we are able to equip our schools to identify the in-school factors and have a better understanding of 'culturally different' behaviours."