There are up to 20 illegal schools operating across the north-east of England, Yorkshire and Humberside, Ofsted has revealed.
The schools are not registered or following a national curriculum and, in some cases, are teaching intolerant views to children.
Inspectors have found literature in some which is misogynistic and homophobic, the watchdog said.
Ofsted regional director Cathy Kirby said she was “worried”.
“It’s not just about the learning materials, it’s the condition of the premises, often where they’re not really appropriate settings and accommodations to have children educated,” she said.
However, it was not a “hugely widespread thing in the north east for us to be concerned about”, she added.
In some cases, the schools catered for parents wanting to home-educate their children, or who preferred them to be schooled in “quite extreme” views of faith, Ms Kirby said.
Ofsted warns of ‘squalid’ illegal schools
Ofsted is warning that pupils are being taught in “squalid” schools that are unregistered and unsupervised.
But Ofsted chief Sir Michael Wilshaw says the process to close such schools is “inadequate”.
Where there is such “illegal activity”, he says, the “full force of the law” should be brought to bear.
Sir Michael has written to the education secretary to say 15 such schools have been found and they should be “registered or closed down”.
He says there are “serious concerns” about the safety of children being taught in these “so-called schools”.