President Obama is effectively ending the controversial education law known as "No Child Left Behind", and sidestepping Congress to do it.
States can request a waiver to opt out, if they create standards even stricter than the Bush-era law.
Critics argue "No Child Left Behind" pressured schools to focus on standardized test scores instead of preparing students for careers and college.
"We're going to let states, schools and teachers come up with innovative ways to give our children the skills they need to compete for the jobs of the future," President Obama said.
In a nod to bipartisanship the president was joined by the Republican governor of Tennessee.
"I might not always agree with this administration on some policy issues or maybe even the role of federal government, but when there are things we can work together on, then we should," said Governor Bill Haslam.
Margaret Spellings, Education Secretary under President Bush, says she's skeptical.
"States and local school officials have shown us that they game the system....they talk a good game, but when it comes time to deliver for students they rarely perform, and that's why we're in this mess in the first place."
The White House says 44 states have already adopted higher standards than those mandated under "No Child Left Behind".