That's completely untrue. According to urbanlegend.com:

CNN tracked down the Indonesian school in question, the Basuki School in Jakarta, which a deputy headmaster describes as a "public school" with no particular religious agenda. "In our daily lives, we try to respect religion, but we don't give preferential treatment," the headmaster told CNN. A former classmate of Obama's describes the school as "general," with students of many religious backgrounds attending. Obama entered the school at the age of 8 and attended for two years.