The Carnival was kicked off the United Nations' UNESCO heritage list last year after a float rife with anti-Semitic symbols raised worldwide condemnation. Yet despite all the warnings, some again targeted Jews.
"Even though Aalst Carnival is much more than that, these facts detract from our values and reputation of our country," Prime Minister Sophie Wilmes said in a statement.
Festival committee chair Dirk Verleysen said floats or individuals "that exceed all limits" of decency would be taken out of the parade, but offensive elements did appear.
Earlier this week, Israel called on Belgium to scrap the annual Aalst parade. Yet one group on Sunday walked around the parade dressed up like insects with fur hats worn by some ultra-Orthodox Jewish men.
Wilmes suggested that authorities would see if they could take action.
"Belgium is a state of law. It is for the Justice Department and concerned authorities to see if the events during Carnival are in contravention of the law."
She said that stereotypes that stigmatize "lead to division. It endangers society. Specifically when it comes to repeated and conscious actions."
Aalst mayor Christoph D'Haese, who has been criticized for taking insufficient action after last year's offensive float, called Wilmes "otherwordly," and added that "I did not see an anti-Semitic or racist parade. To the contrary, I saw a high mass of free speech and creativity." He took time to pose with a Carnival reveler wearing a stereotypical hooked nose.
Chief Rabbi Pinchas Goldschmidt, president of the Conference of European Rabbis, countered D'Haese's view and said that "the satirical procession with anti-Semitic tropes in Aalst, Belgium, are extremely offensive and abuse the power of free speech which is such an essential ingredient in any liberal democracy."
The EU office of the American Jewish Committee immediately called on the European Union to investigate the parade.
"Belgian authorities did nothing to prevent the outright anti-Semitic costumes, which clearly violate the EU's founding values, built on the lessons of the Holocaust and World War II," said Daniel Schwammenthal, director of the AJC Brussels-based Transatlantic Institute.
The overwhelming majority of the 75-plus official entries in the parade's 92nd edition may have touched on anything from town hall politics to Brexit and global climate change, but several again highlighted the theme which caused such an uproar.
Carnival groups claims their three-day festival has a right to mock everything, even those hurtful to others. But even the president of the northern Belgian Flanders, where the festival is held, warned against insulting or excessively mocking people.
One float was about the "Aalst Tribunal" of what is acceptable as humor and carried three puppets on their float each carrying some stereotypical depictions of a Jew, Muslim and a Roman Catholic priest. Some smaller groups also relied on Jewish stereotypes for their presentations.
The Carnival in the industrial city of Aalst has its roots in the Middle Ages and often features satirical floats that take shots at local politicians and the powerful.
Last year's festivities featured one float depicting Jews with exaggerated features and side locks standing over bags of money. The caricatures recalled anti-Semitic tropes of the Middle Ages and Nazi Germany.
Aalst is one of Europe's most famous carnivals and usually is a celebration of unbridled, no-holds-barred humor and satire. Politicians, religious leaders and the rich and famous are relentlessly ridiculed during the three-day festival ahead of Roman Catholic Lent.
UNESCO, Jewish groups and the EU condemned last year's float as anti-Semitic, with the EU saying it conjured up visions of the 1930s.