A council spokesman said the sign was a joke and that local libraries could not arbitrarily reclassify books.
Last week Lance Armstrong ended years of denial by admitting he used performance-enhancing drugs during all seven of his Tour de France wins.
Lance Armstrong, 41, confessed during an interview with chat show host Oprah Winfrey that was watched around the world.
“This was a prank, it happened on Saturday and a member of the public has taken a photo and posted it on social media and it’s gone viral on social media,” said Chris Parsons of Manly Council.
“However you can’t simple reclassify books from fiction to non-fiction,” he said, explaining that classifications were decided at a central level.
Local reports said the sign was posted by a student working part-time in the library. Chris Parsons did not confirm this but said a “little review” would take place at the library.
“It’s a big, busy library and someone has played a practical joke – it’s gone unnoticed for a while and once staff noticed they changed it,” he said.
Pictures of the sign – which ends with a smiley face – have been widely circulated on social media, with many commentators congratulating the library on its stance.
“Librarians do have a sense of humor,” said one Twitter user.
“Awesome. Slow clap Manly Beach Library,” said another.
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