Teachers' pay will remain capped at 1%, it has been confirmed, as the Government sticks to public sector wage restraint.
The announcement means another real-terms pay cut for more than half a million teachers in England and Wales.
Government officials insisted the settlement will continue to "strike the balance" between being fair to public sector workers and taxpayers.
But union leaders warned it was a "missed opportunity which the Government will come to regret", as fresh concerns were raised about the impact pay restraint could have on teacher numbers.
The move comes after intense pressure on Prime Minister Theresa May and Chancellor Philip Hammond - including from a number of Government ministers - to ease limits on wages for public sector workers such as teachers, police officers and NHS staff, after the party lost its majority in the General Election as anti-austerity Labour pledged to scrap the 1% ceiling.
The School Teachers Review Body (STRB) recommended a 1% hike to all teachers' pay ranges, apart from the main pay range, which it said should see a 2% increase.
Teachers on the main pay range are typically those in the first few years of their career. Only those on the minimum and maximum of this scale would be able to get a rise of up to 2%. There was a similar recommendation two years ago.
In a written statement, Education Secretary Justine Greening said the STRB's recommendations, due to be introduced in September, "are consistent with the Government's 1% public sector pay policy".
"Following previous reforms, schools already have significant flexibility, within the pay ranges, to set pay for individual teachers, taking account of performance and retention," she said.
A Deprtment for Education (DfE) spokeswoman said: "We recognise and value the hard work of teachers which is why we have accepted the pay deal proposed by the independent STRB, in line with the 1% public sector pay policy.
"This will ensure we continue to strike the balance between being fair to public sector workers and fair to taxpayers."
The STRB is one of a number of independent bodies that put forward recommendations for wage increases, which are then accepted or rejected by Government departments.
In recent years, these recommendations have been affected by a Government cap on public sector pay as part of austerity measures.
After the 2010 general election, there was a two-year pay freeze with school staff receiving a zero increase in 2011 and 2012. Since then, there has been a cap of 1%.
The National Union of Teachers (NUT) has calculated that teachers' wage increases fell behind RPI inflation by 13% between 2010 and 2016.
In its report, the STRB raised concerns about future teacher shortages, noting that that schools are facing substantial pressures in recruiting and retaining good staff.
"We consider it likely that further uplifts of more than 1% will be required to elements of the pay framework in the coming years to make pay more competitive for teachers at all stages of their careers," the review body said, calling for the DfE to review the national pay and allowance system for classroom teachers.
NUT general secretary Kevin Courtney said: "This is a missed opportunity which the Government will come to regret as the teacher recruitment and retention crisis gets worse.
"Teachers' pay increases have fallen behind inflation by 13% since 2010 while this public sector pay policy has been applied. This latest pay announcement will mean that figure increases to over 15%.
"The pay being offered to newly qualified teachers would be over £3,500 higher if the pay cap had never been applied and schools would have far fewer difficulties in recruiting new graduates."
NASUWT general secretary Chris Keates said it was interesting that despite pressure from Government departments, the STRB had "broken through the pay cap for some of the lowest paid teachers, awarding them 2%".
Russell Hobby, general secretary of the National Association of Head Teachers (NAHT), said: "For many teachers, this marks the seventh successive real-terms cut in their pay.
"We will not be able to attract the best and brightest to teaching if we constantly cut their pay."
Last week, Mrs May poured cold water on calls to end pay restraint, telling MPs at Prime Minister's Questions that upcoming recommendations from review bodies - including the STRB - would be "very carefully considered".
But she also left little doubt her position chimes with that of Mr Hammond, who has warned a relaxation of pay restraint would require extra borrowing or tax rises to avoid increasing the deficit.
Labour leader Jeremy Corbyn accused her of ''recklessly exploiting the goodwill of public servants'' by continuing with a policy which delivers a real-terms pay cut to millions of workers at a time when inflation is running at 2.9%.
Shadow education secretary Angela Rayner said the decision would mean a real-terms pay cut for teachers.
"With pay rises for the vast majority of teachers capped below inflation, they will be worse off in a year as a direct result of this Government's policies," she said.
Liberal Democrat education spokeswoman Layla Moran said a 1% rise was an "insult" to teachers.
"The message coming loud and clear from Theresa May's Government is that it simply does not value the profoundly important work teachers do to help our children achieve their potential," she said.
Dr Mary Bousted, general secretary of the Association of Teachers and Lecturers, said: "Holding teachers' pay rise at 1% for the fifth year in a row will make it even harder to recruit and retain teachers.
"Adding inadequate pay to the toxic mix of stress and overwork is likely to lead to even more teachers quitting."