Over the past 30 years, there has been virulent urban politics surrounding the provision of government-funded Islamic K-12 schooling in suburban south-western Sydney, Australia. In this paper, drawing on examples of local government opposition to Islamic schools, we argue that race and religion constitute contestations of urban space around the establishment of government-funded Islamic schools. We argue that these particular contestations arise from the changing nature of, and historical continuities between, urban politics, education, Islamophobia and racialisation, in pre-9/11 and post-9/11 Australia. The politics surrounding Islamic schools reveals a coded urban politics that can be understood by paying attention to the ambiance of racialised-religious fears produced--in part--by the policies of government-funding of non-secular education.