Long-awaited guidance on tackling homophobic bullying in schools will be published by the Assembly government this spring.
But Stonewall Cymru, the gay rights charity, said it would take more than guidelines to combat sexual bullying as long as teachers received no training in tackling it.
A survey of 2,000 teachers in England and Wales, released by the charity before its Llandudno conference this weekend, revealed more pupils were being bullied because they were gay - or believed to be so - than for religion or race.
Most teachers said insults such as queer and poof were commonplace in schools. Derogatory sayings, such as "That's so gay", meaning "That's rubbish", are not being tackled, Stonewall Cymru says.
Of the teachers surveyed, 94 per cent said they had not been trained to deal with homophobic bullying, and many said they received no clear lead from their headteacher.
More than half of the secondary teachers questioned said they had heard homophobic abuse at school, and two-thirds had heard members of staff use homophobic language.
Stonewall Cymru reported a growing number of incidents involving homophobia among heads and teachers in the past year.
Abigail, a teacher in a faith primary in Wales, recounted the experience of a six-year-old boy at her school who enjoyed wearing women's clothes. "He would ask to carry my handbag," she said. "He became withdrawn and refused to play with others for fear of name-calling - this continued into the classroom. His behaviour has deteriorated, as has his school work."
Abigail said it was hard to tackle these issues because her "male headteacher is obviously anti-gay".
Just one-fifth of secondary and half of primary teachers in England and Wales said their head had a clear strategy for tackling homophobic bullying. Only a quarter said their governors had a clear policy.
Schools in Wales must by law have a written anti-bullying policy, but Rhian Keyse, youth and education officer at Stonewall Cymru, said many teachers did not know how to handle homophobic issues.
"It is a problem across the UK, but we know a lot of teachers in Wales don't feel they have the necessary resources," she said. "This is the legacy of Section 28 (prohibiting local authorities from promoting homsexuality), which deterred schools from discussing these issues."
Methods for tackling sexual bullying are largely determined by individuals. Cerys, a primary teacher, used the experience of one child calling another gay for a class discussion. But Gwen, another primary teacher, said she did not believe in creating an issue where one did not exist.
Workshops on offer
A centre was set up in Cardiff last month to provide support and research into lesbian, gay, bisexual and transgender issues.
The LGBT Excellence Centre Wales runs a project called Safe Space, which aims to tackle homophobic bullying through school workshops. The scheme started after Cardiff council got involved in the case of a gay teacher who was bullied by pupils.