Testing has confirmed the presence of bonded asbestos in mulch at Penrith Christian School.
The NSW Environment Protection Authority (EPA) says a single pile of much has been secured and is not accessible to students.
Removal is being arranged and the school will remain open.
The EPA continues to investigate how contaminated material found its way to various sites across the state.
The current saga was sparked when asbestos was found in mulch at the new Rozelle Parklands close to the city.
Penrith Christian School is the second local site where asbestos has been found. Mulch at Regatta Park in Emu Plains was found to have bonded asbestos earlier this month.
