District Superintendent of Police Prabin Tripathy said the altercation took place between headmaster Rajaram Shil and some teachers who came to the Simlagarh Uttarkhand primary school after long absence.
There were irregularities allegedly committed by the headmaster which irked the teachers following which the altercation took place.
Shil took a knife from the school kitchen and stabbed assistant teacher Suklal Murmu, police said.
Following this, locals entered the school and severely beat up the headmaster, they said.
Both the headmaster and the teacher have been admitted to the Pandua rural hospital.