The ADF has several hundred of the sights, which are prized by elite troops for their accuracy over long range.
Their use by US, British and New Zealand troops has raised alarm among military leaders that it could reinforce views among extremists that the West is waging a crusade against Islam.
The Australian Defence Force is investigating how to remove biblical references etched on to gunsights, without damaging the weapons.
The ADF and military authorities in the US, Britain and elsewhere thought the letters and numbers on the sights were simply stock or model numbers until a US soldier in Afghanistan complained to the Military Religious Freedom Foundation that the initials referred to passage from the Bible. One example was JN8:12 which turned out to be a reference to chapter eight, verse 12 in the Book of John: "When Jesus spoke again to the people he said 'I am the light of the world.
While coalition soldiers were unaware of the significance of the initials, military officials quickly became alarmed that religious extremists could take some propaganda advantage from them being proof the West was waging a crusader war against Islam.
The ADF confirmed yesterday it had been unaware of the meaning of the inscription when the sights were issued to troops.
"The Department of Defence was unaware of the significance of the manufacturer's serial number," the spokesman said. "The sights were procured because they provide mature technology which is highly reliable, in wide use by our allies and best meet Defence requirements. Soldiers are confident in the utility of the sight and the positive and proven effect which it is having on operations."
The spokesman said Defence was conscious of the sensitivities over this issue and was assessing how to address them.
Another inscription was 2COR4:6, which is an apparent reference to Second Corinthians 4:6 of the New Testament. The passage reads: "For God, who commanded the light to shine out of darkness, hath shined in our hearts, to give the light of the knowledge of the glory of God in the face of Jesus Christ."
US military rules prohibit religious proselytising in Iraq or Afghanistan and were drawn to prevent criticism that the US was on a religious crusade in its war against al-Qa'ida and Iraqi insurgents.
The sights are used by US troops in Iraq and Afghanistan and in the training of Iraqi and Afghan soldiers.
The maker of the sights, Trijicon, has a $US660 million ($725m) multi-year contract to provide up to 800,000 sights to the US Marine Corps, and additional contracts to provide sights to the American Army.
Trijicon issued a statement saying: "As part of our faith and our belief in service to our country, Trijicon has put scripture references on our products for more than two decades.
"As long as we have men and women in danger, we will continue to do everything we can to provide them with both state-of-the-art technology and the never-ending support and prayers of a grateful nation."