Students are expected to return to the Islamic School of Canberra next term, despite the loss of Commonwealth funding from Friday.
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The school in Weston looks set to remain open in Term 2, despite the withdrawal of $1.1 million in federal government funding at the end of Term 1.
The ACT Government will continue to provide $400,000 in annual funding to the embattled school, education minister Shane Rattenbury confirmed.
"The Islamic School of Canberra provides a valuable education option for many in the community and it is understandable that there is significant concern within the community about its long term future," Mr Rattenbury said.
"I have committed to work with the school to assist them as much as possible, so that the school can remain open."
But the school must demonstrate it can remain financially viable in order for the funding to carry on, Mr Rattenbury said.
"In the unfortunate event that we are unable to resolve these issues, all current students would be catered for across the ACT Public School system," he said.
"The Directorate would work with the school community, including parents, carers and students to support them in accessing another suitable school."
The fate of more than 200 students was thrown into flux when an investigation into schools run by the Australia Federation of Islamic Councils revealed concerns about how federal funds were being spent.
The Islamic School of Canberra's sister school in Sydney, Malek Fahd also appears set to run in term two despite losing appeal to have $19 million in federal government funding reinstated.
Interim Board chair of Malek Fahd Islamic School Miriam Silva released a statement on on Friday afternoon stating that the school would work with the Federal Government over the next few weeks.
"The Interim Board has made good progress in meeting the Commonwealth's necessarily strict requirements around funding, governance, independence and accountability," Ms Silva said.
"But it has a long way to go and we will be working hard during Term 2 to address outstanding issues and, ultimately, satisfy the Commonwealth that funding should be restored".
The Islamic School of Canberra has until April 26 to appeal the cut of its federal government funding, after an extension was granted.
