The free service supports the national curriculum
BBC Jam, aimed at children aged between five and 16, delivers free content supporting school curricula in English, Welsh and other UK languages.
Online companies said the service damaged their businesses and a review will take place.
NUT Cymru questioned whether private firms would provide the same service.
And the Welsh Assembly Government has also expressed concern.
BBC Jam went live in January 2006, with the BBC pledging to invest £150m over five years.
Much of the English-language content is available in Welsh with core subjects also available in Irish and Scots Gaelic.
In total, 189 staff across the UK, including 19 in Wales, work on the project, which will be suspended from 20 March pending a review.
'Valuable resource'
The decision by the BBC Trust follows a complaint from commercial online companies to the European Commission that BBC Jam had a negative impact on their businesses.
The trust has asked the corporation's management to come up with fresh proposals for how the BBC should deliver its charter obligation to promote learning for school-aged children.
Rhys Williams of teaching union NUT Cymru said the service was a valuable educational asset.
He added: "As a union we believe that education should be a public service and when you start talking about the commercial online companies the alarm bells start ringing and we think 'has this been too successful?'
"It's only 15 months old and it's been cut at very short notice. It makes us very worried.
"It is part of (the BBC's) educational role.
"One wonders to what extent commercial companies are going to step into the gap that the BBC has left in terms of Welsh language provision."
'Real concerns'
BBC Wales Controller, Menna Richards, said she was "disappointed" the service had been suspended.
She said: "We do know that hundreds of thousands of parents, children and teachers have found BBC Jam to be a very valuable resource.
"I think the next step for us now is to seek clarification about what we can do to respond to the demand for further proposals for online learning.
"We in BBC Wales are determined to play a part in that to ensure that school children in Wales in both English and Welsh get the best possible resource available."
On the position of BBC Jam staff, Ms Richards said: "There are real concerns, BBC Wales has around 20 people employed to work on BBC Jam.
"They do a fantastic job, they are talented people and they find themselves in this position through no fault of their own.
"We at BBC Wales will be doing everything we can to support them over the next few months."
A spokesperson for the Welsh Assembly Government said: "They (BBC Jam) provide a good service especially through the medium of Welsh.
"We hope their service will resume as soon as the review is over."
BBC Jam promotional image, with logo.


Kids will have to look elsewhere for educational entertainment, after the European Commission received complaints that the British Broadcasting Corporation's website was "unfair competition" to the commercial online games market.

The site, called BBC jam, will be suspended on March 20, 2007, pending review, per the BBC Trust.

''BBC jam'' offers educationally-oriented games aimed at 5 to 16-year-olds, created with an operating budget of £150 million (US$290 million) over five years, US$85 million of which allocated to independent content producers. The government funded service is formally requesting proposals on how it should promote education and learning digitally, without being "non-compliant".

NUT Cymru, a Welsh teachers' union, is worried about the closure.



Both NUT Cymru and the Welsh Assembly Goverment have questioned the extent to which commercial firms would step in and fulfill the terms of the Welsh Language Act 1993.