Neil Lennon admitted his "heart sank" when he saw the banners that were displayed at Celtic's Champions League defeat by AC Milan.
Uefa opened disciplinary proceedings over banners with a slogan depicting Scottish warrior William Wallace and IRA hunger striker Bobby Sands.
"My heart sank a little bit, I have to say," said Lennon of Tuesday's events.
"There were a lot of other areas of the stadium where supporters were scratching their heads."
Uefa has taken action against Celtic for an incident of a "non-sporting nature".
But the group, known as the Green Brigade, responsible for the display defended its right to "cultural and political expression".
The Celtic boss expressed disappointment at the display and its potential consequences.
"It certainly wasn't the time or the place for a display like that," said Lennon. "There's no place for it.
"It should've been a celebration rather than people having a grumble about something.
"When I came in here, I tried to bring the club together again.
"I think we've done that, certainly with the performances over the last three of four years, so it's disappointing to see that some people want to bring cracks in amongst the club.
"It's not welcome within the stadium. We understand that they have maybe legitimate complaints over some of the laws brought in, but Celtic Park is not the place to bring banners in and display that."
Celtic were knocked out of Europe altogether because of the loss to the Italians.
Lennon says failing to progress to the last 16 of the Champions League was not a huge disappointment, stressing that the club has reached that stage three times in the past 14 years.
"It was a big ask in a group with the calibre of the teams of Ajax, Milan and Barcelona," he said.
"You go over it again and think you maybe could've done better in certain areas, but we are where we are. We can't do it every year."