Parents are upset that a southern Tasmanian school has accepted sponsorship from a sex shop.
It has been reported the school named part of a program after an adult shop.
The State School Parents and Friends group wants clearer guidelines on private sector sponsorship for Government schools.
Spokeswoman Jenny Eddington says schools are constantly in need of funding but some private sector sponsorship is inappropriate.
"The main thing is that there is some advice and some prudency around the sort of promotional effect that's to be had from sponsorship from various companies and organisations," she said.
The Education Union's Terry Polglase says while schools are mostly free to determine what private sponsorship they take, this example is unacceptable.
"Schools operate along ethical lines and that, of course, would be a no-no in anybody's thinking and, therefore at this stage, it would be quite proper for the department to go in and investigate what the circumstances actually were."