A probe is under way into the staging of a so-called UDA show of strength in a council-owned community centre.
The investigation was launched yesterday after pictures emerged of men wearing balaclavas and masks taking part in a display at Sandy Row Community Centre.
The men were wearing sweatshirts embroidered with the loyalist paramilitary group's emblem.
It is understood the pictures were taken in the centre on Saturday night.
Belfast City Council, which runs the community centre, confirmed it was investigating the reports following a number of complaints.
A spokeswoman told the Belfast Telegraph the council "regrets that an incident that appears to endorse a paramilitary organisation took place in one of its community centres at the weekend".
Police also confirmed they are investigating. The images were posted on the Facebook page of high-profile loyalist David Craig.
Craig, who is originally from Paisley in Scotland, moved to Northern Ireland after receiving death threats.
He was jailed for 14 months in 2012 and banned from all UK football grounds for three years after posting abuse about Celtic manager Neil Lennon on his Facebook page following a Celtic v Rangers game in March 2011.
The 26-year-old mocked up pictures of Lurgan-born Lennon and put the words "dead man walking" on the front of his body.
A south Belfast resident said they were disgusted at Saturday evening's event.
"I feel the authorities should look into this matter or else the reputation of Belfast City Council and the perception of council facilities as non-sectarian and places of safety may well be tainted," the resident said.
"The council has a responsibility to ensure whoever is using their property is fit to do so.
"I was horrified to see the pictures, like any right-minded person would be.
"There can be no place for paramilitary shows of strength anywhere in Northern Ireland in 2014," the resident said.
Some of those who were at the centre on Saturday evening claimed it was a band night and denied it was staged to promote the UDA.
A spokeswoman for the council said: "Belfast City Council regrets that an incident that appears to endorse a paramilitary organisation took place in one of its community centres at the weekend.
"This is a clear breach of the terms and conditions for bookings in our facilities. The incident happened during a private booking and we are currently carrying out a full investigation into the issue."
A police spokesman said: "Police have not received a direct report, but are aware of posts on social media which allegedly relate to an incident in Sandy Row.
"Enquiries are ongoing. Police advise anyone who may have knowledge of paramilitary activity to report it to police."