State ethnic relations officials described the act as a "display of hatred" after a passer-by reported the heads placed near an Australian flag at an empty block in Camden, a suburb in Sydney's Southwest, on Wednesday.
Detective Inspector Paul Albury said police were seeking information about a person who had used a citizen's band radio to claim responsibility for the pig heads.
Pigs are considered unclean by Muslims.
Stepan Kerkyasharian, the chairman of the New South Wales Community Relations Commission, a state government body that promotes cultural diversity and community harmony, said the incident followed a local debate that included opposition to a plan to build a school for 1,200 Muslim students on the site.
"This insult and display of hatred is not something any fair-minded Australian would approve of," Kerkyasharian said in a statement.
Islam is a fast-growing religion in secular Australia and has about 400,000 followers out of a population of roughly 21 million people. Tensions have occasionally risen in recent years, most notably days of rioting between Caucasian and Middle Eastern youths at Sydney's Cronulla beach in late 2005.
Jeremy Bingham, a spokesman for the Quranic Society that is planning to build the school, said the incident was "a bit sad, frankly" and that he did not think it was representative of the feelings of most people in Camden .
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