The man, now 55, asked his "vulnerable" pupils, aged between eight and nine, to expose their genitalia in class in a deaf school in Melbourne in the late 1970's, the Victorian County Court heard on Thursday.
He was found guilty by a jury earlier this year of nine counts of gross indecency.
The judge described his offence as "very serious" and a breach of trust.
"This offending was evasive, humiliating and damaging to young and particularly vulnerable children," the judge said.
It had long-lasting effects on the children, making their lives more difficult and painful and leaving them with feelings of "anger and disgust", he said.
The victims had flashbacks and bad dreams, the judge said.
While he was not insensitive to the seriousness of the offending, he would not jail the teacher because of his cancer, he stressed, sentencing him to five months in jail, wholly suspended for one year.
"I see such a sentence as the just one in the unusual circumstances of your case," he said.
The court heard there was a 55-75 per cent chance of the teacher living for five years.
The father of two, who no longer works in his profession, was diagnosed with cancer during his trial.
He is soon to begin aggressive treatment, the court was told.
The judge suppressed the teacher's name from publication because medical evidence indicated stress would have an adverse impact on his treatment.
Outside court, a spokeswoman for his victims say they feel cheated by the sentence.
"People aren't satisfied with what they have heard today," she said.
"I know that what ever has happened to these victims happened a very long time ago but it doesn't replace what has happened they have been traumatised for the rest of their lives."