Poorer pupils are particularly badly affected, says the head teacher training charity Future Leaders Trust.
Researchers plotted the distance between state schools in England against the proportion of pupils achieving five good GCSEs.
The steepness of the drop in poorer pupils' grades was "quite astounding", said report author Katy Theobald.
Looking at average GCSE attainment over three years to 2014, all students did worse in schools that were further apart - but the impact was greater on students eligible for free school meals, the researchers found.
Schools less than 1km (0.6 miles) apart saw almost 68% of pupils overall achieving five A* to C GCSE grades. Among pupils eligible for free school meals, the figure was 49%.
But even a slight increase in the distance between schools saw a sharp drop in grades for poorer pupils, according to the study.
A 1-2km gap between schools saw less than 42% of poorer pupils achieving good results, falling to less than 37% for poorer pupils at schools with a 3-4km gap.
Nationally, some 65% of pupils overall achieved five good GCSEs over the three-year period, while the figure for pupils eligible for free school meals was 42.6%.
So pupils at schools less than 1km from their nearest neighbour perform better than average on both counts, say the researchers.
They calculate that for each additional kilometre between schools, the attainment of free school meals students declines by an average of 1.06 percentage points.
However, the average attainment of free school meals students was not lowest in the most geographically isolated schools - more than 15km from their nearest neighbours, according to the researchers, although it was still poorer than in the most highly populated areas.
Some of the success of urban schools stemmed from the fact it was so much easier for teachers collaborate, said Ms Theobald.
"If you are in London you can just pop into another school to observe good practice - if you are in an isolated school, it's a whole day away," she said.
It is also harder for isolated schools to recruit staff at all levels, according to Malcolm Trobe, deputy general secretary of the Association of School and College Leaders.
And all too often they were in areas of high unemployment, "which makes the job of raising pupils' aspirations that little bit more difficult", said Mr Trobe.
Pupils at isolated schools do worse at GCSE than teenagers in areas with a choice of schools, suggests research.