Mr Israr Khan shouted out "Who is your God?" to the pupils watching and taking part in a Christmas concert rehearsal at Washwood Heath Secondary School, Birmingham, where 60 per cent of the 1,200 pupils are Asian.
A number of them are said to have shouted "Allah" in reply, while others booed.
Mr Khan did not, by mutal consent, return to school, but Birmingham education Authority this week said he had not been formally suspended. There will, however, be a disciplinary inquiry.
Neither Mr Khan nor the school was available for comment this week. But Ahmed Versi, editor of the Muslim News, says Mr Khan's actions have been misrepresented. According to Mr Versi, Mr Khan believes there has been no staff consultation about the carol singing, despite a school policy suggesting there should be.
A spokeswoman from Birmingham LEA says the school carol concert went ahead the following evening without incident.
Ibrahim Hewitt, development officer with the Association of Muslim Schools, said: "Mr Khan is right in one sense, but the way he went about making his point was unwise. If parents are happy with what's going on, you have to accept that. But from a religious point of view, he is correct."