Monty Panesar was racially abused during England's match against New South Wales in Sydney on Sunday, an England spokesman has confirmed.
Panesar, a Sikh, has become a fans' favourite in England
Sydney's Daily Telegraph alleged that a member of the crowd called the Sikh left-arm spinner a "stupid Indian".
"We were asked by the paper to confirm if the incident took place and we have done," a team spokesman told BBC Sport.
"We will continue to monitor the situation, but we're not going to make an official complaint at this stage."
The England and Wales Cricket Board spokesman also confirmed that Panesar and batsman Kevin Pietersen, who was born in South Africa, were verbally abused in England's opening tour match in Canberra last week.
A spokesman for the Sydney Cricket Ground said security officials had not been made aware of any racial abuse on Sunday - the first day of England's three-day warm-up match - and that only three people had been ejected for being intoxicated.
Australian crowds always give English players plenty of banter and that's fine as long as it doesn't step over the appropriate boundaries
Cricket Australia's Peter Young
Cricket Australia, meanwhile, said it was only made aware of the allegations 24 hours after they were said to have taken place.
"It's very hard to do anything after the event because the crowd's gone home and we don't know who it was," said CA's Peter Young.
"We spoke to the ECB management on Monday and we've been working very closely with them. But we didn't have anyone there and by the time it was reported to us it was 24 hours cold."
Panesar, 24, was fielding on the boundary for much of Sunday with England struggling to contain the state side's batsmen.
The newspaper alleges a spectator shouted at Panesar: "Give us a wave, Monty. You can't speak English, you stupid Indian. I'll have to say it in Indian.
"What are you doing playing in the English side? You're not English."
There are new tough guidelines in place to tackle racial abuse.
South Africa skipper Smith warned Panesar could be targeted
Fans face lifetime bans if found guilty while nations failing to issue such bans could be barred from staging international matches at the venue where the incident occurred.
And Young confirmed that security would be beefed up for the five-Test Ashes series which starts in Brisbane next week.
"Australian crowds always give English players plenty of banter and that's fine as long as it doesn't step over the appropriate boundary," said Young.
"Anyone who hears a comment like that would be helping us if they immediately reported it to the ground authorities.
"We have put the public on notice that the monitoring of crowd behaviour is going to be significantly upgraded this year.
"We're trialling an SMS texting system where we're inviting spectators who either hear or witness inappropriate behaviour to call the number so that ground authorities can be aware of the issue.
"If one person out of 100,000 shouts out an abusive comment it can be difficult to pick them up, so we do need help."
Panesar underwent counselling from team psychologist Steve Bull before leaving England for Australia.
The fear was he would be singled out for abuse by the Australian crowds.
The attack comes a year after the South African team complained about being racially abused by Australian crowds.
The ICC was forced to make changes to its anti-racism policy following the complaints.
Before the tour began South Africa captain Graeme Smith warned Panesar would face an "unbelievable amount of abuse" during the Ashes series.
"I was chatting to some of our team just the other day and we all shivered at the prospect of what he could be in for," Smith said.
New South Wales skipper Simon Katich condemned the abuse directed at Panesar.
"I don't think any of us want to see that. It is disappointing," he said.
"Hopefully, it won't happen again. Cricket Australia have said they will take a tough line against it and hopefully they will."