The teacher worked at Rancho Dominguez Preparatory School in Long Beach, which is part of the LAUSD. The teacher's name has not been released, and there is no word on the images the camera captured.
The teacher has been removed from the classroom and the school planned to hold a parent meeting Friday at 5 p.m. and again Monday morning.
Students say they found the camera taped underneath a desk where several others sit.
One student said she wasn't sure if the camera belonged to the substitute, and thought he was recording the students for the regular teacher.
Another student said he wanted to report the camera because it was aimed at students' laps. This sixth-grader discovered the camera on Tuesday during his seventh period science class. He said it fell from underneath the desk where he was sitting with about six other students.
He described the apparatus as a black miniature camera with wires and a battery with a piece of tape around it.
"I think I hit the camera with my knee. It fell on the ground, so I picked it up," the student said, adding that the teacher snatched it from his hand. When the student asked the teacher what he was planning on doing with the camera, the teacher reportedly replied, "Don't worry about it."
The student and several others reported the camera to school officials, who said the substitute teacher was immediately removed, police were notified and an investigation was launched.
"He had been subbing for two days and at this point, he is not in the classroom. He's not with the students. The students here are safe," said Daryl Strickland with the LAUSD.
No arrest has been made, but the LAUSD confirmed that the teacher has been contacted and a search warrant has been served.
Despite this assurance, parents say they still feel uneasy.
"You hear that it happens in other schools, and now it's happening here in your own kid's school, and I mean, I just don't know what to say," said parent Magdalenaa Ramos.
LAUSD officials say they're trying to be as transparent as possible, calling parents and sending letters home to inform them of the situation.