"This is an effect of long-term work - we focus on student welfare and children with special needs. It is paying off," Arvidsjaur school director Annette Rydén told the TT news agency.
According to Rydén, Arvidsjaur's small size also helps by making it easier to enforce a positive sense of social control.
Two more communities in the north followed in second and third place: Piteå, south of Luleå, and Vindeln in Västerbotten northwest of Umeå. Another three municipalities from the northern part of the country ranked in the top 10 of Sweden's 290 municipalities: Luleå in fifth, Pajala in eighth and Norsjö in 10th.
"Obvious investments on resources, the proportion of trained teachers and a high staffing ratio has paid off," union chairwoman Eva-Lis Sirén said in a statement.
Separately, the most improved school this year was Ödeshög in central Sweden, northeast of Jönköping.
The municipality climbed to 72nd from 272nd place. Arvidsjaur advanced from 40th place last year.
The union has ranked Sweden's best school communities since 2002.