The 45-year-old, who has not yet been identified, is said to have tried to spread hatred against Muslims by fabricating the stabbing.
He sparked a full-scale terrorist alert yesterday morning, saying a man wearing a balaclava and brandishing a box cutter and scissors had entered the Jean-Perrin nursery school in the Paris suburb of Aubervilliers.
The area has a large Muslim population, many of whom have complained of stigmatization in the wake of the November 13 attacks by ISIS who killed 130 people.
The teacher, who is married to a headmistress and has 20 years experience, nevertheless lied about an 'Islamic' terrorist shouting: 'This is Daesh (an Arabic acronym for ISIS). This is a warning.'
Police took the teacher to hospital, but he only had self-inflicted 'scratches' on his body and was quickly released, said a prosecuting source.
Following questioning by judicial police, he confessed that he had made the whole story up in a bid to spread mistrust and suspicion.
Aubervilliers' mayor Pascal Beaudet visited the school and answered questions from the media
A spokesman for the Bobigny prosecutor today confirmed that the man had been placed under formal criminal investigation for 'reporting imaginary crimes'.
The offence is punishable by up to six months in prison.
A parent at the school said: 'The teacher is a strict disciplinarian and has a strong personality. He doesn't tolerate bad behavior.
'It's obvious to all of us that he was trying to whip up prejudice against Muslims and we've made this clear to those investigating.
'There are lots of Muslims associated with the school and they find what has happened particularly offensive.'
There have been a number of incidents in France in recent years in which people have made up attacks in order to spread prejudice against Muslims, said a Paris police spokesman.
Such fabrications have increased in the wake of this year's terrorist attacks in Paris, the spokesman added.
Saint-Denis was where Abdelhamid Abaaoud, the mastermind of the deadly Paris attacks, was killed in a dramatic shootout last month. Dailymail reported.
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