Cowra Public School has been recognised by Prime Minister Julia Gillard in an Australia-wide address about school funding to the National Press Club.
Ms Gillard spoke about Cowra's achievements in bringing their national testing scores from below to above average in just three years.
Principal of Cowra Public School Brad Tom said it was a testament to the school's hard work to be the only primary school mentioned.
"To be chosen as the national example of success is a huge honour for Cowra Public School," he said.
"It highlights the strong commitment for educational excellence that is promoted at the school."
Ms Gillard said Cowra's year 3 students were "at best, level and sometimes behind kids at comparable schools" in 2009.
Over the next two years, Cowra Public School hired six extra learning support staff to run individual reading tutorials.
Mr Tom said the school received extra funding through national partnerships, which allowed the school to establish extra programs.
They worked with children individually to bring their levels to higher than the national average of comparable schools.
"They sat with every struggling child, every day for half an hour, one on one, side by side, uninterrupted," Ms Gillard said.
"Their fingers running alongside the lines of the book, sounding out words patiently and practically teaching how to read."
Ms Gillard said the hard work and achievement was a credit to staff, parents and students.
She said Cowra was setting an example for other schools.
"Step by step, year by year, this is school improvement," Ms Gillard said.
Extract from Prime Minister Julia Gillard's address to the National Press Club on Monday, September 3:
"We have already created change.
"Take Cowra Public School; a rural primary school in the Central West of NSW.
"It's got around 370 students, nearly 20 per cent of those kids are Aboriginal.
"The 2009 national testing scores showed Cowra's year 3 kids were at best level, and sometimes behind kids at comparable schools.
"The government ensured the school had that information, but getting that information was only the starting pistol.
"The principal Brad Tom, the teachers, parents and the kids: they were the ones that had to run the race.
"The kindergarten teachers used phonics to teach reading. The school hired six extra learning support officers to run individual reading tutorials.
"They sat with every struggling child, every day for half an hour, one on one, side by side, uninterrupted; their fingers running alongside the lines of the book, sounding out words patiently and practically teaching how to read.
"The whole school community got stuck in, and it worked.
"In 2010 and 2011, Cowra's kids went from being level with or behind kids at comparable Australian schools, to catching up and often being in front.
"Step by step, year by year, this is school improvement."