Vivette Ferguson, who was head of St Andrew's primary school in Islington, north London, from September 1993 until her resignation in 2003, faces 13 allegations.
These include behaving in an intimidating and aggressive way towards staff, parents and pupils, breaching confidentiality and failing to respond to allegations of mistreating a pupil.
She also faced allegations of paying her daughter, Naomi Sutherland, and another teacher for a week's holiday during term-time and receiving funding for an after-school club that did not take place.
Beverley Briggs, chair of the school's governors, told England's General Teaching Council that she had spoken to members of staff in July 2003 after a series of complaints from teachers and parents.
Ms Briggs said she was shocked at the levels of stress shown by staff at the 210-pupil school.
She said that members of staff told her that there was an emotionally unsafe environment at the school as a result of Mrs Ferguson's erratic and aggressive behaviour.
Ms Briggs said: "I heard her shout at a pupil in a way that was very shocking. There was contempt in her voice and it made me feel very uncomfortable."
The disciplinary committee also heard how Mrs Ferguson removed a pupil from a school assembly by dragging her with one arm so that the pupil's feet did not touch the floor.
On another occasion, a pupil's work was screwed up in front of a class because the child had used the wrong paint.
Mrs Briggs was told how one child clung on to a handrail and refused to let go when asked to go to Mrs Ferguson's office. She read out the statements she had taken from the teachers to the GTC committee.
Karen Todd, a learning support assistant, said she had found Mrs Ferguson's actions at the school "degrading, insulting and humiliating".
Lorraine McDonald, also a teaching assistant, said: "We would all stand there like lemons and didn't speak out in the face of abuse and humiliation."
Katy Drinkwater, a Year 1 teacher, explained how Mrs Ferguson repeatedly humiliated her and undermined her authority in front of the children.
The disciplinary panel also heard how Mrs Ferguson had poor relations with parents, reducing one to tears.
Since Mrs Ferguson's departure from the school, its Ofsted reports and national test results have vastly improved.
She will respond to the charges when the hearing continues in August.