Paolo Di Canio must clarify his current political beliefs and distance himself from fascism, according to Football Against Racism in Europe director Piara Powar.
Di Canio has been announced as a replacement for sacked Sunderland boss Martin O'Neill and takes his first training session at the club on Monday.
The former Lazio striker has previously admitted to having fascist leanings, telling Italian news agency ANSA in 2005: "I am a fascist, not a racist."
Former foreign secretary David Miliband immediately resigned as Sunderland's vice-chairman and non-executive director after Di Canio was named O'Neill's successor, citing the Italian's "past political statements".
Powar is concerned the appointment of Di Canio could have dangerous repercussions if his political beliefs are not immediately challenged.
"When there is a rise of intolerance and there is a coach in the Barclays Premier League, which is the most watched league globally, who hasn't clarified or wanted to renounce his fascist views during his time in the UK, it is a worrying time," Powar said.
"Di Canio has the opportunity to clarify his views and let us know what his approach will be and how his strongly held views will influence how he will do his job.
"It would be hypocritical of us (at FARE) not to point out his self-proclaimed fascist past when we are outraged by Lazio fans when they make the Roman salute, which we all know has been made famous by Hitler and the far right.
"When they make that gesture and monkey noises to black players, it is hypocritical to pick out the views of fans and not a manager at a top-level side. Di Canio has made that salute himself as a player.
"I think from our perspective we would say we are seeing the rise of the far right and the intolerance and hatred that goes with that across Europe. Being a fascist is not a soft political label.
"In many way it's a political label that comes across with all sorts of dangerous ideas and ideals and that is the concern for us."
Di Canio, who quit as manager of npower League One side Swindon in February, was the subject of a Football Association investigation last year after on-loan Leyton Orient striker Jonathan Tehoue claimed he was racially abused by the Italian.
Di Canio was later cleared of the charge, although Swindon made an apology to the player.
However, with several other high-profile instances of racism in the game in recent times, Powar believes it is all the more necessary for Di Canio to explain his political leanings.
"We live in a different political climate than 2011 and there has been a lot gone on in football over issues of race and that gives a different focus to a manager who calls himself a fascist being appointed to a top post," Powar said.
"Fascism is an ideology which at heart is about intolerance and a way of government that has no place in the 21st century.
"It is all the more prevalent now as we see a rise of the far right through racial attacks.
"There is no question to have a manager who calls himself a fascist at at Premier League club will encourage those movements.
"I think there is no place in a sport which seeks to draw out positive impact on social relations and community to have someone who says 'I am a fascist and I admire Mussolini'."
When asked if Di Canio could be the right choice for Sunderland to help ensure their top-flight survival, Powar said: "There are all these good footballing reasons to employ him, but are footballing reasons enough when someone comes with the baggage he comes with?"Sunderland fans groups said the club's success should take priority over politics but they remain wary of Di Canio's views.
Supporters' Club member Stan Simpson, a season ticket holder for 40 years, said: "There is no way, as fans, we would entertain any fascism in our club.
"As long as he doesn't express any political opinions I can cope with it. I've got no problem with him being there.
"But if he expresses those sort of opinions while he's there, he should be sacked, it doesn't matter how or where. It's not acceptable in this country."
Janet Rowan, a long-time supporter and secretary of the Chester-le-Street supporters' group, said she thought Di Canio was "very passionate" about his involvement in the game but said extremist politics "isn't something we want in football".
She added: "I respect David Miliband's views but as fans we have got to support Di Canio.
"I think with some people, his appointment probably will leave a bad taste but I hope that the majority of fans are going to put Sunderland football club ahead of everything."