Councillors look set to abandon plans for a new primary school at Angmering, despite being given a three-acre site for it.
Developers are building a bypass and 600 homes, which are expected to swell the number of school-age children in the village by 147.
West Sussex County Council originally intended to build a new school to cope with the influx on land provided by the developers.
But after a change of heart at County Hall, two existing primary schools could now be extended instead.
The move follows a detailed report which says a new primary school would not be educationally or financially viable.
Education and arts councillor Neil Matthewson is backing talks over splitting the five extra classrooms required between St Margaret's and St Wilfrid's primary schools.
Both schools have been told that as pupil numbers grow their budgets will be increased to provide new teachers.
But County Hall has no intention of giving up the site which was earmarked for the new school.
The land is next to Angmering's secondary school and will be offered to the governors as additional playing fields.
It has also been revealed that County Hall will receive an index-linked payment of £1,093 every time a new house is completed to help meet education costs.
Figures released today by the council show that the two existing schools would need to be extended rapidly because 125 houses are due to be built next year and 222 in 2002.
A council report says: "The educational and financial viability of a relatively small primary school would be a matter of concern, particularly in regard to its ability in the longer term to sustain pupil numbers when the pupil population numbers have stabilised."
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