During a visit to the school last month, inspectors found that pupils are encouraged to aim high and do better than their individual targets.
Particularly strong features include pastoral care, promotion of healthy eating and students' contribution to the school.
In her report, lead inspector Heather Barnett recognised the progress which has been made at the school since headteacher Patrick Ottley-O'Connor took up the post in 2007.
Mrs Barnett said: "Along with restructured senior and middle leadership teams, he has coped well with a range of complex issues.
"It became apparent that, in order to avoid a projected budget deficit, there would need to be a significant reduction in staffing. This has been accomplished without allowing the focus on students to be lost.
"In addition to the financial position improving, there has been a rise in students' attainment and progress in other key aspects of provision.
"The senior leadership team has a clear idea of what needs to be done to continue improvements in the school and a well-shaped vision for the future."
Inspectors highlighted the development of the sixth form, which is improving in all aspects.
Mrs Barnett said: "Students greatly enjoy their studies and many of them take a leading role in the school.
"Tutors know the students and provide well-targeted support and guidance, helping the students on to the next stage in their career."
A large majority of students enjoy school and say it is improving, accorfing to the report.
"The quality of teaching is satisfactory, as is the curriculum, and the school has sound plans to develop it further," she said.
"There are sound systems to support students' personal development and strong partnership working to ensure the most vulnerable are well supported."
The school has a strong focus on supporting students in adopting healthy lifestyles.
Form time is used well and pastoral care is strong.
Mrs Barnett said: "The school is a harmonious community where students get on well together.
"It has a very good understanding of its local community and very effectively promotes community cohesion."
Despite the improvements which have been made at the school, inspectors still found some areas of concern.
Mrs Barnett said: "The behaviour of some students in certain lessons and around school is still below the standard expected.
"The school is aware of this and is working to address the issue by ensuring policies and procedures are applied consistently."
Inspectors found that limitations of planning and pace in some lessons prevent students from making rapid progress.
The school needs to increase the level of challenge for the most able students and develop effective use of new technologies.
Headteacher Mr Ottley-O'Connor said: "We are pleased that Ofsted have recognised the significant progress that has been made to transform our approach to learning at Todmorden.
"The whole staff, governors, parents and the community should be really proud of the achievements of Todmorden High School and the outcomes of the inspection.
"When I started here three and a half years ago, I said I wanted a school that the town could be proud of. This report shows us that we are in that position now.
"We are also really pleased that it recognises the work not only that we do in the school but everything we do in the community. That comes out as a major strength of the school.
"It celebrates the progress that we have made and gives a good base for the new head to build on and recognises the good plans that we have for the future."
Helen Plaice, who will take over as headteacher in September, said: "It has given me some real targets where we need to improve further.
"It's given me a real focus and confirmed where we need to go."