Pre-school children attending two nurseries in Oxfordshire are being taught a new version of Baa Baa Black Sheep - Baa Baa Rainbow Sheep.
See ewe... sheep really can come in many colours
Critics say altering the words of the traditional nursery rhyme is an example of political correctness gone too far.
But the charity running the nurseries, Parents and Children Together (Pact), said the move was educational, not motivated by racial concerns.
Pact said children were encouraged to use a wide range of words in songs.
"Pact has established that children sing a variety of descriptive words in the nursery rhyme to turn the song into an action rhyme," the charity said in a statement.
"They sing happy, sad, bouncing, hopping, pink, blue, black and white sheep etc and they also exchange boy and girl at the end of the rhyme.
"This encourages the children to extend their vocabulary and use up some energy."
While the words have been altered at two Oxfordshire nurseries - the Abingdon Family Centre and the Sure Start Centre in Sutton Courtenay - other nurseries in the area have not taken such steps.
"We sing Baa Baa Black Sheep and Baa Baa White Sheep because that's reality, that's what the children see in the fields and it encourages them to look around them," said Jill Edge, from the Sunshine Centre in Banbury, north Oxfordshire.
"Realistically, they are not going to see rainbow sheep in the fields. There are much better ways of addressing these issues."
In 2000, a warning that the nursery rhyme Baa Baa black sheep should not be taught in schools because it was "racially offensive" was scrapped.
The guidelines by education chiefs at Birmingham City Council were dropped after black parents condemned the advice as ridiculous.