The emergence of the chat, which contained inappropriate images and offensive commentary, led the school this week to expel some students, suspend others and take the issue to police.
NSW Police's commander of the child abuse and sex crimes squad says a review of material provided from the chat had determined "none ... is classified as child abuse material".
"Again, police will continue to review activity, make inquiries and will work with the school, parents and the eSafety Commissioner in relation to any matters that arise," Detective Superintendent Jayne Doherty said on Friday.
The private school in Sydney's northern suburbs charges annual fees of up to $35,000, boasts an indoor Olympic-sized swimming pool and a 750-seat music theatre, and has a long list of prominent political, entertainment and academic elite among its alumni.
According to reports by the Daily Telegraph, the chat hosted on Discord had racist, homophobic and misogynistic language including the n-word, fa***t and salutes to Hitler.
Headmaster Scott James contacted parents on Wednesday, condemning the inappropriate images and offensive commentary posted by senior students and how the school had addressed the boys' behaviour.
Some images in the chat were taken during school activities and later doctored, he said.
"The nature of these posts is contrary to the values and culture of Knox and is unacceptable," Mr James said.
"All students involved have been counselled and have participated in lessons to reiterate the importance of respectful and appropriate behaviour as well as the impact of their choices."
Based on students' participation, punishments from suspensions to expulsion have been dealt out.
Mr James asked parents to talk to their sons about the importance of acting "respectfully and sensibly" whether online or in person.
"We take no pleasure in the action we have taken, but we believe we have found the right balance between upholding the values of this community and the need for consequences," he said.
The eSafety Commissioner has had success in having Discord take down abusive and illegal material from group chats, but believes the company needs to make it easier or users to report abuse.
"eSafety is aware of media reports about students at Knox Grammar School exchanging concerning content on a private chat group," an eSafety spokesman said.
"We have made contact with NSW Police to offer assistance as appropriate."
The eSafety website contains advice on dealing with online abuse and cyber bullying. Teachers can also access materials to help create safer online environments for school communities, including responding to online incidents.
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