  We construct a manifestly gauge invariant Exact Renormalization Group for
SU(N) Yang-Mills theory, in a form suitable for calculations without gauge
fixing at any order of perturbation theory. The effective cutoff is
incorporated via a manifestly realised spontaneously broken SU(N|N) gauge
invariance. Diagrammatic methods are developed which allow the calculations to
proceed without specifying the precise form of the cutoff structure. We confirm
consistency by computing for the first time both the one and two loop beta
function coefficients without fixing the gauge or specifying the details of the
cutoff. We sketch how to incorporate quarks and thus compute in QCD. Finally we
analyse the renormalization group behaviour as the renormalized coupling
becomes large, and show that confinement is a consequence if and only if the
coupling diverges in the limit that all modes are integrated out. We also
investigate an expansion in the inverse square renormalized coupling, and show
that under general assumptions it yields a new non-perturbative approximation
scheme corresponding to expanding in 1/\Lambda_{QCD}.
