The changes announced on Wednesday affect Google's "Apps for Education" service that has been offered to schools for the past seven years.
Among other things, Google says it will no longer pore through Gmails sent through Apps for Education for clues about students' interests. The scanning helps the Mountain View, California, company figure out what types of ads might appeal to the students.
Although Google didn't show ads in Apps for Education unless school administrators choose to allow the commercial pitches, the company could still use the personal data collected in Gmail scanning to peddle products when students might be using other online services.
More than 30 million students, teachers and administrators use the Apps for Education suite.
"Earning and keeping their trust drives our business forward", Bram Bout, Google's director of education wrote in a blog post. "We know that trust is earned through protecting their privacy and providing the best security measures."
Google's habitual scanning of Gmail had become the focal point of a federal lawsuit alleging the practice violated users' privacy.
The case included claims by students at the University of Hawaii and the University of the Pacific in Stockton, California that they were required to use Apps for Education as part of their enrolment in schools.
US District Judge Lucy Koh dealt the lawsuit a setback in April when she denied a request to certify it as a class action representing tens of millions of Gmail users.
Google's scanning of Gmail in schools also had been facing questions about whether it violated the 40-year-old Family Educational Rights and Privacy Act, which is meant to protect student privacy.
Bout's blog post didn't cite the legal issues facing Gmail-scanning in his blog post outlining the revisions to Google's Apps for Education policies.
"Google executives are always pushing the limits and only back off when their hands are caught in the cookie jar", said John Simpson, privacy project director for consumer watchdog, a group that has railed against Google's data-collection practices for years.
Google is also removing the option that allowed school administrators to show Gmail ads when students were using Apps for Education.