The NAPLAN results, released on Wednesday morning, showed fewer than 30 per cent of students in very remote schools rated as "strong" or "exceeding" in literacy and numeracy.
That is compared to at least 60 per cent of students at major city schools across years 3, 5, 7 and 9 hitting those high targets in almost all learning areas.
Nationally, one in 10 students across all grades were found to need extra support, while on average one third of all Indigenous students were in that category.
The Australian Curriculum, Assessment and Reporting Authority, which oversees NAPLAN, said the strongest results tended towards non-Indigenous students in urban areas from the highest socio-economic backgrounds.
Mr Clare said the results made it "blisteringly clear" that more work was needed to improve education outcomes and bridge the gap.
"What we've done this year with NAPLAN is raise the bar. We've lifted the standards students are expected to meet, and we've done that deliberately so that we can better identify the students that need extra help," he told Nine's Today program.
"Evidence shows that if you fall behind in third grade, it's very hard to catch up by the time you're in year 9. Only 20 per cent of children do that.
"As a result, we're seeing some of those children drop out of high school and not finish year 12, and that's at a time where more and more jobs require you to finish high school."
This year's exams were the first under a new approach to test students against four levels of skill: exceeding, strong, developing and "needs additional support".
The authority's chief executive David de Carvalho said with expectations set higher than in previous years, the reporting could better support schools and students.
"The results also continue to highlight the educational disparities of students from non-urban areas, Indigenous Australian heritage and those with low socio-educational backgrounds," he said.
Mr Clare said he would examine education funding with his state and territory counterparts.
"We've got to fix that funding gap, but we've got to fix this education gap that this report makes clear as well," he said.
"We've got to make sure that we tie this funding to the sort of things that are going to help children who fall behind to catch up, and then to keep up, ultimately finish high school."
The Australian Education Union said the results reflected significantly under-resourced schools in remote areas, particularly in the Northern Territory, where the number of students in need of support was as high as 85 per cent.
"We can't close the achievement gaps without closing the resources gaps," union president Correna Haythorpe said.
NAPLAN reporting showed 65 per cent of students across Australia achieved the higher literacy and numeracy expectations of "strong" and "exceeding", while 23 per cent were at the "developing" level.
Girls performed better than boys in writing, with higher percentages of "strong" and "exceeding", while boys generally fared better than girls in numeracy.
The online tests, held in March, involved 1.3 million students including 1050 enrolled in distance education or homeschooling, across 9414 schools.
