Footage of the incident captured by surveillance cameras inside Duluth High School shows Sam McNair, 17, approach the teacher from the side and then wrap his arms around her.
The teacher told school officials McNair's "cheeks and lips" touched her nape, but he denies that.
McNair also denied having been warned that hugging teachers could get him in trouble, and says he's hugged teachers in the past without repercussions.
Nonetheless, a school hearing officer ruled that McNair had violated the district's sexual harassment policy, and would be suspended for the rest of the school year.
She also blasted the school for not informing her in advance that her son's hugging was problematic and could lead to a suspension and loss of scholarship.
The school district would not comment on the incident except to say that "hearing officers consider witness testimony, a review of the known facts, and a student's past disciplinary history...when determining consequences."