The Swedish Schools Inspectorate ruled that the law does not regulate the method of slaughter used for the meat served in schools, according to a report in the agricultural magazine ATL.
Parents in Svedala in southern Sweden had reported a school to the agency for serving halal chicken arguing that the school meals fall under the non-denominational praxis of the Swedish education system.
The issue was discussed in the municipal council in September and has been the subjected of intense debate among locals and parents on social media.
The municipality's schools have been serving the chicken, which originates from Denmark, for the past four years.
Halal slaughter follows old religious rules. Halal is any action or object which is permitted according to Islamic law, is not limited to food and can be applied to all matters of daily life.
With regards to the slaughter of animals halal refers to the use of a sharp knife to make an incision to the throat. The animals should also be slaughtered while uttering the words "in the name of God".
Kosher and halal meat products are permitted in Sweden if the animal is anaesthetized prior to its throat being cut. While technically against the rules, the majority of Muslims and Jews living in Sweden accept this compromise.