In addition to teaching reading, writing and arithmetic, the schools are accused of being breeding grounds for the Jemaah Islamiyah, an al Qaida-linked terror group.
Jemaah Islamiyah is responsible for the deadly bombings of a Bali nightclub last October and the Marriott Hotel in Jakarta two months ago.
Sidney Jones, a researcher for the International Crisis Group, told ABC News there is a Harvard, Yale, Princeton, and a Columbia of radicalism.
He said the Al Mukmin school, with 1,800 students, is the Harvard of the group.
"There's virtually no act of violence associated with Jemaah Islamiyah that doesn't have at least one graduate of this school involved," he told ABC.
Indonesian officials reportedly keep a close watch on the schools, especially Al Mukmin. But ABC said officials are reluctant to move against them without absolute proof of criminal activity.