The Islamic education centre, which had operated for 15 years, was closed after Magdi Allama, a newspaper columnist, said in the Corriere della Sera that it "produces young fundamentalists whose minds have been forged by a culture of segregation, intolerance and religious hatred".
Mr Allam, an Egyptian journalist, has written a book called Bin Laden in Italia.
Aly Sharif, the headteacher, denied it was a Koranic school. Officially, the commune (municipal authority) of Milan said the school, operating illegally since 2000, was closed on September 7 for reasons of "hygiene".
The school offered Koran-based teaching, but also prepared students for Italian state exams as external candidates. Others took an equivalent Egyptian diploma organised by the consulate.
The decision to close the school came in a week when an imam in Turin was expelled under anti-terrorism laws and the director of an Islamic centre in Bologna was removed for remarks made in support of terrorist Osama Bin Laden.
Last week, Milan's public prosecutor decided to pursue parents of pupils at the centre for "failing to respect their obligation to guarantee children a basic education", a fine for which is likely to be l30 (pound;20). Housed in a disused factory on the edge of the city, the school catered for 500 six to 14-year-olds, mostly of Egyptian origin.
Attached to a mosque, it has not been recognised by the Italian state and has been operating illegally since the introduction in 2000 of laws creating "parity" between state and private-sector schools.
Previous offers of new premises, and to integrate students in state schools, were turned down. Last year, the authorities blocked a proposal by a state school to create a separate class for some of the centre's students.
Last Sunday, the students' families rejected the offer to integrate pupils into local state schools. This was despite assurances from the local head of education that the pupils could continue to study Arabic and the history of Islam as a small part of the curriculum can be negotiated locally.
Letizia Moratti, the education minister, had also said that the girls would be able to continue wearing Islamic headscarves.
Most of the parents are expected to opt for home schooling - which is allowed by Italian law - or to send their children back to Egypt, although Mr Sharif said some have threatened a hunger strike.
For many commentators, the question is why it has taken so long to close an illegal school.
Mario Scialoja, the Italian-born president of the World Muslim League, said: "The school should have been closed years ago."
About 1.1 million of Italy's 58 million population are Muslim.