Australia's biggest Islamic School has been stripped of millions of dollars in government funding following allegations that its money was not being used just for education.

Malek Fahd Islamic School in Greenacre, south-west of Sydney, which has more than 2,400 students, could be forced to close its gates after the Federal Government said it would withdraw up to $19 million funding.

On Monday, the Department of Education issued a notice to the Islamic institution - revoking its Commonwealth funding - with the move placing hundreds of teaching jobs on the line.

Education Minister Simon Birmingham said that the funding will be axed as of April 8 after the school had failed to address how the money was being spent, as required under the Education Act.

Sydney-based Malek Fahd Islamic School (pictured) has been stripped of $19 million in federal funding following allegations the money was not being used only on education

Education Minister Simon Birmingham (pictured) said the funding will be axed as of April 8 after the school had failed to address how the money was being spent, as required under the Education Act

The revocation comes after a review into six schools authorities affiliated with the Australian Federation of Islamic Councils (AFIC) after concerns were raised about their financial management and governance.

'I am committed to ensuring that all school authorities meet the requirements to ensure that our taxpayer dollars and any private investment by parents is being spent to benefit Australian students,' Mr Birmingham said in a statement to Daily Mail Australia.

'Unfortunately, the authority that operates Malek Fahd Islamic School was not able to demonstrate to my department that they had addressed the significant concerns about their financial management and governance arrangements raised during the formal compliance review of their operation.

'Last year, the department issued a formal compliance notice when it found that the school authority was not complying with fundamental governance, financial and accountability requirements of the Australian Education Act 2013.

'After carefully considering the response to the issues raised in the compliance notice, my department had to make the difficult decision to revoke the funding approval.

'My department will work with New South Wales school authorities to help ensure students and families that are impacted by this decision receive the appropriate support.'

More than 2,400 students, who are enrolled at the Sydney's Islamic school could be left stranded

The federal government has withdrawn millions of dollars in funding for Australia's largest Islamic school

More than 2,400 students are believed to be enrolled at the school in Sydney's south-west (stock picture)

The school received about $19 million in funding from the Federal Government in the past year (stock picture)

A NSW Department of Education spokesperson told Daily Mail Australia that they are continuing to work with the Commonwealth Department of Education and Training.

'Due to ongoing litigation, it is inappropriate for the Department to provide further comment,' the spokesperson said.

NSW and ACT secretary of the Independent Education Union John Quessy told ABC News the school could face closure following the revocation.

'We'll need to seek a meeting with the school to find out will they still be operating,' Mr Quessy said.

'It's quite a dramatic move, recurrent funding is usually used to pay teacher and staff wages.

'Malek Fahd is quite a big school, we're talking about hundreds of jobs.'

NSW and ACT secretary of the Independent Education Union John Quessy said the school could face closure following the revocation (stock picture)

A NSW Department of Education spokesperson told Daily Mail Australia that they will continue to work the Commonwealth Department of Education and Training on these matters (stock picture)

The Department of Education and Training said the Act requires all school authorities operating on a not-for-profit basis, to be 'fit and proper' and 'ensure that funding provided is used only for school education'.

A statement from the Federal Department of Education said it was continuing its compliance assessment of five other school authorities affiliated with AFIC.

The schools include the Islamic College of Brisbane, the Islamic College of Melbourne, the Islamic College of South Australia, the Islamic School of Canberra and Langford Islamic College, in Western Australia.

'Concerned parents of students at Malek Fahd Islamic School should contact the school for further information,' the department said in a statement to Daily Mail Australia.