The Chief of British Office For Standards in Education, Sir Michael Wilshaw says schools will be downgraded if inspectors come to this conclusion that wearing of full veils will harm pupils’ education.
Based on the new policy, which is expected to be enforced in all state schools an inadequate rating would be applied if inspectors were worried about the effects of pupils or teachers wearing face veils in classrooms.
Earlier, Education Secretary Nicky Morgan said such decisions about veils were up to the uniform policies of individual schools.
The decision has sparked strong criticism of people in education sector as well as Muslim community.
The Muslim Council of Britain says Ofsted did not need to resort to the "megaphone of the media to show that it is flexing its muscles."
Head teachers' leaders say that inspectors should not be judging schools on dress codes.
The Ofsted chief said he was concerned that some heads were "coming under pressure" to relax a ban on face veils, either for staff or pupils.
He said that inspectors could downgrade schools, or rate them "inadequate", if they thought wearing a veil was damaging teaching.
The Muslim Council of Britain called for "accommodation" over wearing the veil.
"It is a shame that the niqab - the full face veil that a minority of Muslim women wear - has become a polarizing issue when it need not be," the council said.
Meanwhile, Head of the teachers' union, Leora Cruddas of ASCL said Ofsted should not be judging schools on uniform policies.