Official figures show cases of temporary exclusion – when pupils are sent home, usually for a few days – fell from 1,903 in 2007-8 to 1,591 in 2008-9.
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That is a decrease of 16 per cent and well down from the peak of 2,180 exclusions recorded in 2005-6, but Edinburgh still had the second highest number of pupils permanently excluded.
Today, city education chiefs said exclusions were always a last resort and predicted the downward trend would continue.
Across Scotland, exclusions in 2008-9 were 15 per cent down on the previous year and 24 per cent down on 2006-7.
Permanent exclusions were virtually halved from 164 to 87. In Edinburgh, the number removed from the register was down from 38 to 21.
Councillor Marilyne MacLaren, Edinburgh's education convener, said: "Exclusions are always a last resort and our policy is to work with pupils and look at alternatives.
"We have done a tremendous amount of work over the last year to reduce incidents of exclusions and we are confident that this positive trend will continue this year."
The rate of exclusions in Edinburgh was 36 per 1,000 pupils. Across Scotland, the rate varied from 103 cases per 1,000 pupils in Dundee to only ten cases per 1,000 pupils in East Renfrewshire.
Some 93 per cent of all exclusions lasted one week or less. Persistent disobedience was the most common reason for exclusion – 27.3 per cent of all cases, with verbal abuse of staff the next most frequent (22.8 per cent); followed by physical assault (15 per cent) and insolent or offensive behaviour (14.3 per cent).
Keith Brown, minister for skills and lifelong learning, said the reduction in exclusions across Scotland reflected the good work of schools and local authorities in engaging pupils.
He said: "These figures show that the many approaches schools and local authorities have in place are having a real impact.
"However, we must not be complacent. While exclusions due to serious issues such as violence or substance misuse are rare, we need to continue to promote positive behaviour in our schools and give targeted support where needed.
"Of course, the best way to reduce exclusions is to ensure learning is exciting, relevant and engaging for young people and I believe this a major factor behind the fall in exclusions during the past two years."
Labour said despite the trend in the latest figures, three per cent of children were still being excluded from school. The party's schools spokesman, Ken Macintosh, called on the SNP to improve school discipline.
He said: "School indiscipline is a major cause for parental concern, not only bullying and serious incidents of violence, but the low-level indiscipline, such as cheek or noisy behaviour, which is probably the most wearing on teachers and the most distracting for pupils."