Claims that ethnic minority children could suffer racist attacks if their school shuts or moves have been branded "scandalous".
The Education Authority (EA) is working on plans involving three south Belfast primary schools - Blythefield, Donegall Road and Fane Street.
The latter has significant numbers of 'newcomer' children.
The EA inherited the project from the former Belfast Education and Library Board, which had been looking at how to reorganise schools due to hundreds of empty desks.
It was suggested that land at the City Hospital, metres from Fane Street, could accommodate a single new build, but this is no longer viable.
Almost two-thirds of pupils at the school are from immigrant families, hailing from 22 countries.
In a submission to the EA, the Northern Ireland Council for Ethnic Minorities warned there is a "high security risk of racist attacks against ethnic minority and Muslim families" if they are forced to move to another location.
Chief executive Patrick Yu said families would need to walk to the new school down Donegall Road, through the `Village'.
"We do not want to see another Holy Cross number two to happen in that area," he said.
The Policing Board was yesterday told that the PSNI had no information to suggest a merger would lead to increased racist attacks.
DUP assembly member David McIlveen, who raised the issue at the meeting, said Mr Yu should retract his comments.
"It is wrong that the communities that live off the Donegall Road should have been branded in this way. The time has come for Mr Yu to admit he was wrong and say sorry. That is the least people deserve."
Billy Dickson, chairman of the Blackstaff Community Development Association, said the reference to Holy Cross would "only add to tensions in the area".
"Once again the area in which I live is being tarnished unfairly. Many children from ethnic minorities live in the wider area around Fane Street including the Village."
Ulster Unionist councillor Graham Craig called on Mr Yu to resign, describing his comments as "both shocking and extremely disappointing".
"Mr Yu has lost any credibility he may have had previously as a result of such an insulting out-burst," he said.
Former councillor Bob Stoker also said it was "despicable" to "demonise" an entire community.
