The board of embattled Sydney Islamic school Malek Fahd will step down following pressure from parents and students.
The federal government spent $19 million on the Greenacre school last year but says it will withdraw funding over concerns about the school's governance and financial management, which might force the school to close when payments stop in April.
At a parents' meeting on Monday night, the school's board agreed to step down so that a new, independent board can be appointed.
"I certainly think that it is a step in the right direction given the concerns about governance and lack of transparency," Lakemba MP Jihad Dib told AAP on Tuesday.
Mr Dib met with representatives from the NSW Department of Education and Education Minister Adrian Piccoli's office on Tuesday to voice concerns about the welfare of students, their families and staff.
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"It is very important that a solution is found - one that allows over 2400 students to be able to continue their education, without undue stress," Mr Dib said.
"I encourage all decision-makers to put the needs of the students at the centre of their planning."
The Australian Federation of Islamic Councils, which runs Malek Fahd school, has been contacted for comment.
