Parents accused Rev Dr Paul Chamberlain of 'ruining' Christmas after he addressed Year Six pupils from Lee-on-the-Solent Junior School in Hampshire.
The minister, who is a vicar of nearby St Faith's Church, allegedly told the children, 'You're all year six, now let's be real, Santa isn't real', during a talk about the Nativity.
Dr Chamberlain reportedly also told the children that their parents were the ones eating the cookies left out for Santa on Christmas Eve.
The remarks are said to have left children in floods of tears and teachers at the school have been left scrambling to try and bring the magic back.
A complaint has also been lodged against Dr Chamberlain by a parent.
Now, teachers have begun making badges for pupils which read 'Lee-on-the-Solent believe', to try and inspire some festive magic.
They also wrote to parents in an email explaining how they have told children that 'all stories and legends around Christmas' were legitimate.
One parent said: 'I don't know how it can be undone, but I think it's absolutely disgusting.'
The mother said she was now trying to 'push as much magic' over the festive period as possible.
Another parent told how 'lots of children started crying in class' and that it was 'wrong' as 'a lot of parents have had to confess to their child'.
The Reverend has since written to pupils to apologise and is said to have accepted his remarks were 'an error of judgment'.
A spokesman for the Diocese of Portsmouth told MailOnline: 'We understand that the vicar of St Faith's, Lee-on-the-Solent, the Rev Paul Chamberlain, was leading an RE lesson for 10 and 11-year-olds at Lee-on-the-Solent Junior School.
'After talking about the Nativity story from the Bible, he made some comments about the existence of Father Christmas.
The remarks were made in a talk to pupils at Lee-on-the-Solent Junior School in Hampshire
'Paul has accepted that this was an error of judgment and he should not have done so.
'He apologised unreservedly to the school, to the parents and the children and the headteacher immediately wrote to all parents to explain this.
'The school and diocese have worked together to address this issue, and the headteacher has now written to parents a second time, sending them Paul's apology.'