Mr Balls said he wanted to know if the current situation struck "the right balance between allowing independent schools autonomy, operating in accordance with their ethos and values, and protecting the young people attending those schools from teachers displaying racist or intolerant views or behaviours that could be harmful".
He said there was "no place for racism in our schools" but that the report made it clear that incidences of teachers promoting racism were "extremely rare".
Mr Balls said last year he wanted this review to see if there were sufficient powers available "to keep racism and BNP activity out of schools".
British National Party leader Nick Griffin said at the time his members were victims of "political oppression".
Racist remarks
The NASUWT union, which has campaigned to have BNP members banned from schools, said it was disappointed by the review's findings.
General secretary Chris Keates said the report was "an opportunity that's been missed" to bring teachers into line with police and prison officers.
"The idea that a person who signs up to membership of the BNP can simply leave these beliefs at the school gate and behave as a 'professional' when they walk into school is risible, " said Ms Keates.
"The report is woefully inadequate and littered with contradictions."
She said too much attention was paid to the number of incidents in schools, saying "one incident is one too many".
Only six incidences of BNP membership by members of the teaching profession or governors were brought to the attention of the Department for Children, Schools and Families in six years, the report said.
It also found only nine incidents where teachers making racist remarks or holding racist materials had been referred to the General Teaching Council for England.
But the Association of School and College Leaders welcomed the findings.
Its general secretary Dr John Dunford said: "Of course people with racist views should not be working with young people in schools. However, it is much less clear that there should be a blanket regulation on the issue.
"The aim should be genuinely to challenge young people to think for themselves and to form their own opinions rather than to promote a particular ideology."
The review into independent schools will report in September.
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