Parents lodged a complaint against Shahnaz Parvin, a teacher from Jajira south of Dhaka, after several students fell ill.
Jajira's government administrator, Rahela Rahmatullah, said an investigation was underway into allegations 28 children had been force-fed drain water.
"We will take necessary legal steps if she is found to have breached rules," she told AFP.
The 25-year-old teacher denied forcing the children to drink the water, saying she was only trying to scare them after they failed to prepare for class.
Administrators at Gangaprasad Primary School described the teacher's actions as "reprehensible" and said they would await the outcome of the investigation.
Students described being sick after Parvin passed around a jug of filthy water for them to drink.
"My teacher asked me to fetch a jug of water from the sewer. And then she fed it to the rest of the class," one unidentified student told a daily newspaper.
The news has caused outrage in Bangladesh, where corporal punishment in schools was officially banned in 2010.
But beatings and other punishments are regularly meted out and rights groups often raise instances of abuse.
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