Hundreds of students relocated after asbestos found in public school campus

About 700 students will be relocated from a public school in Sydney's south-west after asbestos was found in mulch on campus.

The students will be moved from Liverpool West Public School to Gulyangarri Public School for at least a month while clean-up is underway.

The school was flagged as a potentially hazardous site on Friday afternoon after it was discovered the same mulch supplier had been used at the campus as the Rozelle Parklands, the NSW Environment Protection Authority (EPA) said.

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Health Minister Prue Car says the school "definitely has the capacity" to hold the influx of students and classes won't be merged.

"My advice is that it's in no other school locations," Car said.

"It is very serious for us ... when we find something like this in the mulch in the garden bed of a playground.

"We have acted very quickly."

It comes as a major event in the Mardi Gras program is cancelled due to more bonded asbestos being found in mulch at Victoria Park in Sydney.

City of Sydney Council announced today the Mardi Gras Fair Day scheduled for Sunday would not proceed due to public health concerns.

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Lord Mayor of Sydney Clover Moore said the decision was "incredibly disappointing" but community safety had to come first.

"We will continue to work with Mardi Gras once the asbestos issue is resolved.

"Today's decision underscores how serious this is.

"The NSW government and the EPA must make sure this never happens again."

Fair Day is a major event in the annual Mardi Gras calendar, with more than 70,000 people expected to attend each year.

The council said it was notified on Monday by the NSW EPA that tests had revealed possible asbestos contamination in mulch at Victoria Park.

But despite efforts to clean up the affected areas, further more detailed investigations ruled out holding the Fair Day at the park.

Asbestos has now been detected at a total of 22 sites across Sydney, prompting the closure of parks, building sites, schools and train stations.

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The EPA has banned the mulch supplier from making any further sales, while the investigation into the source of the contamination is under way.

But that supplier - Greenlife Resource Recovery Facility (GRRF) - insists the mulch is asbestos-free when it leaves its sites and has tests to prove it.

NSW Premier Chris Minns said yesterday the situation was "completely unacceptable".