Police have arrested five teenagers who allegedly racially abused a bus full of school children from Jewish schools in Sydney's eastern suburbs.

A group of eight young men boarded the bus, full of primary school students from Moriah and Mount Sinai colleges and Emanuel School, at Darley Road in Randwick around 4:00pm on Wednesday.

The teenagers made physical and racial verbal threats to the children as the bus made its way through Randwick to Bondi Junction, police said.

Jacqui Blackburn, whose three young daughters were on the bus, said the students were traumatised by the incident and many were crying when they got off the bus.

"They are scared," she told 702 ABC Sydney.

"My little daughter said she's just really scared of everything now."

Mrs Blackburn also questioned why the bus driver allowed the teenagers onto the private school bus.

"Why on earth were they even allowed on the bus?" she said.

"They wore civvy uniforms. They weren't part of the school."

But police said the men had passes to get on the bus and the bus driver told them he was unaware of what happened.

Superintendent Jason Box from the Eastern Suburbs Local Area Command said he hoped the incident would not feed current tensions over the situation in the Middle East.

"I believe this is a random opportunistic incident and to just be mindful that it hopefully isn't anything more than that," he said.

The president of the Jewish board of deputies, Yair Miller, said the schools were preparing counselling and support services for the children traumatised by the racial abuse.

The board will hold discussions with the State Transit Authority and the schools on safety measures for students on school buses.

"We are providing support to those affected and we are trying to ensure that the message gets out that this sort of racist abuse is totally unacceptable, especially against the most vulnerable in our society, that being primary school age children," he said.

Police arrested five of the teenagers at Dover Heights, in Sydney's eastern suburbs, at 3:30am today after residents recognised them from publicity over the attack.

The teenagers were taken into custody but were too drunk for police to interview.

They were left in their parents' care and were expected to be interviewed later today.

Police were still looking for three more males in relation to the attack.

The incident was condemned by politicians on both sides of State Parliament.

Deputy Premier Andrew Stoner said the incident could have a lasting impact on the students involved.

Police investigate incident where children were racially abused on bus. ( ABC News: David Spicer )

"Whatever the motive of those individuals involved, sadly, the legacy of their short but cruel ride through the suburbs of Sydney will no doubt haunt those young children and their families for a long time to come," he said.

Deputy Opposition Leader Linda Burney said the broader community was disgusted.

"It's not about who's right or wrong in the Israel-Palestinian conflict," she said.

"This is about the actions by one group of young people against children who were simply travelling home from school."