A Melbourne teacher accused of telling his grade 4 students "inappropriate" stories about violence, murder, urination, defecation and incest has lost an unfair dismissal case.

Former Caulfield Junior College teacher Chris Adams also told his students to keep the stories secret, showed them R-rated fighting scenes from movies and purchased a massage from them.

Fair Work Commission has ruled the teacher's termination was valid.

He was sacked in January after the Education Department found that he acted in a "disgraceful, improper" manner.

After receiving numerous complaints from parents in November 2015, the Department suspended the teacher from the state school and launched an investigation.