There will also be changes to alleviate the administrative burden for principals as a matter of priority. This will allow schools to focus on what they do best - educating children.
Premier Gladys Berejiklian said there is room for improvement when it comes to our student's performance across NSW.
"To ensure students receive the best education we must be able to enforce best teaching practice consistently across our schools," Ms Berejiklian said.
"Local Schools Local Decisions is a sound policy but we need to make sure it works as it was intended. Adjustments will make it easier for the NSW Government to provide support to schools that are underperforming."
Schools will earn the autonomy to make funding, and educational decisions by hitting a range of targets, using criteria such as Bump It Up, HSC results and NAPLAN results.
Minister for Education Sarah Mitchell said the NSW Government is investing a record amount in education and the improvements to Local Schools Local Decisions will strike the right balance between autonomy, accountability and support for schools.
"Improving Local Schools Local Decisions is unashamedly about lifting performance in NSW through supporting evidence based best practice teaching and learning," Ms Mitchell said.
"It is fantastic that many schools have been able to excel under Local Schools Local Decisions, but other schools need more attention when it comes to improving outcomes. These changes to the policy will enable us to provide the support that these principals and teachers need.
"We want to help principals by removing unnecessary administration burdens and allowing them to spend more time leading their schools and supporting their students."
The NSW Government will consult with education stakeholders on the reforms and will agree on targets with schools by the end of Term 4 2020. The changes will be implemented on Day one Term 1 2021.