Outrage has followed an apparent protest in which two pigs' heads were rammed on to metal stakes, with an Australian flag between them, on the site of a proposed Islamic school in Sydney.
The NSW Community Relations Commission has branded the act "a display of hatred".
A member of the public alerted the police after making the discovery on the empty block of land earmarked for the Islamic school on Cawdor Rd at Camden, in Sydney's south-west.
The proposed Islamic school, which would have 1200 pupils, has been a source of tension in the local community. This month more than one thousand residents protested against it, with some saying the school would damage the area's social fabric. The local council also received several thousand written objections during the planning approval process, which has yet to be completed.
The chairman of the CRC, Stepan Kerkyasharian, said: "This insult and display of hatred is not something any fair-minded Australian would approve of."