New figures show some 87% of Glasgow pupils left school to go into so-called positive destinations in 2011/12 – up 1.2 percentage points on the previous year.
National rates rose one percentage point to 90%.
The gap between Glasgow and the rest of Scotland now sits at 2.3 percentage points – the narrowest ever.
Officials are particularly pleased with an increase in the proportion of school-leavers entering higher education, either at college or university, which rose for the fifth year in a row to 29.3% – an increase of one percentage point.
For the first time in Glasgow, more school-leavers now progress into higher education than any other destination.
The percentage of leavers recorded as unemployed decreased by 1.3% to 10.6% – the city's lowest ever percentage.
Stephen Curran, the council's executive member for education, welcomed the figures.
"I'm delighted that we are finally able to celebrate the positive destination figures of Glasgow's young people for this great achievement across our secondaries," he said.
"Not only have we recorded the best ever exam results last year, the published figures prove that we are also closing the gap with the rest of the country and our children going on to education, training or employment.
"A rise of 1.2% compared to the previous year is really good news and a testament to the hard work, determination and commitment of pupils and their teachers as well as our investment in education."
Hugh Donnelly, secretary of the Glasgow branch of the Educational Institute of Scotland, also paid tribute to the hard work of teachers.
However, he warned proposals for cuts to education services in the city – as well as the demise of a national training initiative for school staff called the Chartered Teacher Scheme – threatened future progress.
"The figures are extremely welcome, particularly given the challenges that teachers presently face in the classroom," he said.
"There has been a greater focus on employability in schools and lots of good work in terms of professional development of teachers.
"However, we sincerely hope the current financial restraints and political decisions to overturn reductions in class sizes and the chartered teacher initiative will not impact on future attainment and achievement."
For generations, Glasgow pupils have been outperformed by counterparts across Scotland. The situation exists because many Glasgow schools deal with a catalogue of social issues linked to poverty.
On average, 30% of pupils receive free school meals – a key indicator of poverty – compared to just 15% elsewhere.
There has also been an influx of immigrants whose children speak little or no English.
Despite these challenges, the city's schools have improved dramatically over the past five years. Glasgow City Council believes this is partly due to a decision to target poor teachers, with those unsuited to the job moved into non-teaching roles. Attendances have also improved and exclusions have been cut.