The chip is embroidered into school uniforms using conductive 'smart threads'. A teacher can then scan these to view the pupil's identity, photo, whether they misbehaved in lessons and their school attendence record.
Hungerhill headteacher Graham Wakeling said the pilot was "not intrusive to the pupil in the slightest" because tracking would not go beyond the school's gates.
However, the chip has drawn criticism from civil liberties groups. David Clouter, from LeaveThemKidsAlone, a campaign group, was appalled by the idea.
"To put this in a school badge is complete and utter surveillance of the children. Tagging is what we do to criminals we let out of prison early," he said.
The chips were developed by Danrbro Ltd, which was set up by Andy Stewart, an ICT teacher at Hungerhill School, and a school uniform company.
Schools could fit scanners to doors or give teachers hand-held scanners to identify pupils entering or exiting rooms.
Darnbro siad their product can "trace a pupil's every step during the school day" and that the system can be set up to limit access to doors, such as shutting the main doors of a school to pupils during classtime.
Mr Stewart, 36, said the system would cost about £2000 for a small primary school and up to £14,000 for an average-sized secondary, according to the Times Educational Supplement.
The Department for Children, Schools and Families supports the use of electronic registration to improve safety and security and reduce truancy.