There is too much variation in how schools teach the Welsh Baccalaureate and in the enthusiasm and expertise of teachers delivering it, say inspectors.
It comes in its report on reformed qualifications introduced in 2015.
Estyn also says there has been a narrowing of the curriculum with fewer options for pupils because of the focus on core subjects.
This latest report follows another only a few months ago from the Welsh exams watchdog which said the Welsh Bacc was “too complex” and that a number of pupils, teachers and parents struggled to understand it.
Responding, Shadow Education Secretary, Darren Millar, said:
â€œThe Welsh Baccalaureate is certainly a valuable qualification, but we need to see action to reduce the pressure on teachers and students engaged in it.
â€œClearly there needs to be some kind of streamlining, because the qualification is almost universally seen as too complex and teaching resources are being spread to thinly.
â€œWe believe that the Welsh Baccalaureate should continue to be offered to all students in Wales but it should not be a compulsory subject.â€�