"Apparently, everyone was talking up at the pencil sharpener, and she said, 'You [expletive deleted] need to sit down,'" said Tamika Ivy, a parent of one of the children in the classroom, told WTVA.
The word was a racial slur for African Americans.
The substitute teacher was suspended two days without pay. Parents are asking for the teacher to be fired.
Houston School District Superintendent Steve Coker said the situation was unprofessional and inappropriate.
The unnamed teacher is remaining in her position as a bus driver.