The words "F**k Arabs" and "Israel Palestine" were found on the wall in the southwest Sydney suburb of Wiley Park on Friday.
According to 2021 census data, 50 per cent of residents in the area are Muslim, hailing from Bangladesh, Lebanon and India.
Homes Affairs Minister Tony Burke said he emerged from a meeting in Melbourne to "news of images of horrific graffiti".
"To the thugs who are trying to intimidate my community: You don't represent Australia, your bigotry is rejected and condemned," he posted on X, formerly Twitter.
I've just come out of a meeting in Melbourne to news of images of horrific graffiti which has turned up in Wiley Park, the suburb next door to mine.— Tony Burke (@Tony_Burke) To the thugs who are trying to intimidate my community:You don't represent Australia,Your bigotry is rejected and condemned.January 17, 2025
City of Canterbury and Bankstown Mayor Bilal El-Hayek said he spoke to Campsie police, posting on social media that "enough was enough".
"Attacking people on the grounds of their race or religion must not be tolerated," he said.
"This is blatant vandalism and must be called out ... it's not tit for tat!"
NSW Multiculturalism and Small Business Minister Steve Kamper called the graffiti a "heinous racially motivated" attack on a small business.
"This abhorrent, racist and Islamophobic language must be condemned in the strongest possible terms, and we must continue to reject the importation of overseas conflict into our society," he said.
Police confirmed they are investigating the graffiti and said they "took hate crimes seriously".
It comes just a day after Australia's Jewish community was rattled by a string of anti-Semitic attacks.
At least three separate acts of vandalism have targeted Sydney's Jewish community in the past week, including swastikas painted on synagogues and arson attempts.
A house formerly owned by Executive Council of Australian Jewry co-chief executive Alex Ryvchin was targeted in an arson and graffiti attack on Friday.
Overnight in the Middle East, Israel's security cabinet approved a ceasefire deal with Hamas, however the agreement is subject to the full cabinet's approval.
The Israeli-Hamas accord could see hostages released from Gaza as early as Sunday and end 15 months of conflict that has devastated Palestine.
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