A number of Islamic schools in Indonesia have in the past been linked to terrorist organisations, including the Ngruki college in central Java which boasts a number of the 2002 Bali bombers as alumni.
The school, or pesantren, in Solo has long been linked to Islamic fundamentalism.
It was founded by radical cleric Abu Bakar Bashir and was attended by Bali bombers Mukhlas and Amrozi.
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But the Indonesian Religious Affairs Ministry's secretary-general, Bahrul Hayat, onThursday downplayed connections between terrorism and the teaching of a radical Islam in some schools.
His comments came as he accompanied Australia's Foreign Minister Bob Carr on a tour of a madrasah (a community-based religious school) in south Jakarta which is being funded by AusAid.
"I can guarantee that because all the madrasah, pesantren (are) under the government system," Mr Hayat said.
"We control all the curriculum for religious education.
"There is no radicalism in madrasah."
Mr Hayat said the links between terrorism and schools in Indonesia was because of elements working from outside the education system.
"Of course we also have to understand there is a system outside the madrasah," he said.
There are 68,000 madrasah in Indonesia, of which 1500 receive Australian funding worth about $47 million.
Senator Carr said Australia committed "in our interests and in Indonesia's interests to seeing that the country has a good education system".
"Australia is a good neighbour and a good friend of Indonesia," he said.
During his visit to the school, Senator Carr announced that Australia would provide an additional $99 million in funding over the next two years towards a poverty reduction program in Indonesia.
The National Program for Community Empowerment provides grants for education, health and infrastructure.
"Almost 120 million Indonesians, nearly half the population, live on less than $2 a day," Senator Carr said during a visit to the Manarul Huda Madrasah, an Islamic school in south Jakarta.
The new funding takes Australia's total support for the empowerment program to $314 million.
It will also contribute to targeted support in remote villages in the provinces of Papua and West Papua, including training for local school graduates in basic engineering skills to build village infrastructure.
