The explosive incident has forced the East Preston Islamic College to call in a senior imam to tell its 650 Muslim students that the Bible and Christianity must be respected.
Anxious teachers at the school have also petitioned principal Shaheem Doutie, expressing "grave concern" about an "inculcation of hatred and radical attitudes towards non-Muslims" at the school, including towards non-Muslim teachers.
The Bible desecration took place last week at a school camp held near Bacchus Marsh, about 50km west of Melbourne, attended by 33 teenage Muslim boys ranging in age from Year7 to Year 10.
A school report of the incident, obtained by The Australian, says it happened late at night and involved three students and another two watching.
"The main perpetrator (a Year 7 student) urinated on the Holy Bible, tore some pages from the Holy Book and burnt them then finally spat on the Holy Book," the report says.
The second boy, from Year 9, "tore pages from the Holy Book and burnt them", while a third student, from Year 7, "tore pages from the Holy Bible and then he rolled it up like a cigarette and pretended to smoke it".
The boys come from a variety of ethnic Muslim backgrounds -- one is believed to be an Albanian/Malaysian, another Lebanese and another Indonesian.
Mr Doutie, whose school receives about $3.9 million in state and federal government funding each year, told The Australian yesterday that both he and the school community were appalled by the Bible desecration and that he had expelled the first two boys and suspended the third.
In a letter to all staff on Monday, Mr Doutie wrote: "The school unconditionally apologises for this horrible act as conducted by some illiterate and ignorant students while under the care of EPIC teachers.
"We regard the desecration of the Bible in a very serious light and therefore we have taken serious action against the offenders.
"The Bible is an important book both for non-Muslims and Muslims and should be treated as a holy book by all religions."
Mr Doutie said he did not believe that the boys realised the significance of their act.
But to ensure it did not happen again he had called in the assistant imam of the Newport Mosque, Oman Haouli, to tell the students that the Bible was a sacred book. "My lesson to them was to respect their neighbours and respect all religions," Mr Haouli said yesterday.
But the desecration incident has shaken the nerves of the school`s teachers, about half of whom are non-Muslim.
A petition signed by 22 teachers expressed "anguish and dismay at the grave incident of the desecration of the Holy Bible".
"This whole incident implies a deep hatred inculcated in the students towards the Christians/non-Muslim teachers," it says.
The petition said there had been "previous incidents of students misbehaving towards non-Muslim teachers".
It called on the school to "take steps to rectify this explosive situation" to ensure the safety of teachers.
Mr Doutie said the school had tried to contact the parents of the expelled boys to find out why they had desecrated the Bible. But he said the school had not received a response.
EPIC is an eight-year-old primary and secondary school in Melbourne`s north that caters mostly to the children of working-class immigrant Somali and Lebanese families.
The Bible desecration comes at a time of heightened tension among Australia`s 300,000-member Islamic community, many of whom believe their religion is being unfairly discriminated against because of terrorism fears.
Many Muslims remain angry about the public humiliation suffered by their spiritual leader, the mufti Taj Din al-Hilali, after the Sheik likened female rape victims to pieces of meat who brought the attacks on themselves.