Before and after its release, Bully caused a lot controversy among parents and educators since its first inception. Criticism has arisen due to the adult nature of previous Rockstar Games, in particular the Hot Coffee mod in Grand Theft Auto: San Andreas. The title of Bully itself caused a great deal of controversy, leading to the game being marketed as Canis Canem Edit in PAL regions, which means "dog eat dog" in Latin. While groups such as Bullying Online and Peaceaholics have criticized the game for glorifying or trivializing school bullying, some groups counter that the protagonist is just as much defending himself and crusading to end bullying in the Academy and that picking on girls or weaker kids is a serious transgression with serious ramifications. Most of the criticism surrounding Bully was voiced before the content of the game was available to the public. In 2006, the United States-based Entertainment Software Rating Board officially gave Bully a rating of "T" (suitable for ages 13 and up), the BBFC gave Canis Canem Edit a 15 rating, the New Zealand OFLC restricted it to persons 13 years of age and over and the Australian OFLC rated it M (Moderate). In 2007, Yahoo! Games listed it as one of the top ten controversial games of all time.
Sexuality is a recurrent theme throughout Bully. Five different missions involve Jimmy performing favours for different girls, the successful completion of which earns him a kiss. Additionally, the art class minigame is used to improve Jimmy's ability to talk to girls, as well as his ability to make out with them and receive a health bonus, which in turn increases with each subsequent art class that Jimmy passes.
Although it does not play a role in the storyline and is strictly optional. Other sexual themes involve a gym teacher who is stated to have hit on the girls in school, and a student reading a men's magazine. There is also a pornography store called "Come Hither" in Bullworth Town, although Jimmy is unable to access it.
Jimmy has the ability to kiss certain boys in the game. This was deemed inappropriate for being sold in certain areas that children could access due to the homosexual content, but because this is an optional mechanic it went untouched by censors. Rockstar also defended the claims stating that there was nothing wrong with homosexuality.
Prior to both the ESRB's rating and the release of Bully, Jack Thompson filed a lawsuit attempting to have the game blocked from store shelves in Florida. Thompson declared the game a "nuisance" and a "Columbine simulator". He also argued this point on Attack of the Show along with Adam Sessler arguing against him on the show's "The Loop." Thompson's petition, filed with the 11th Judicial Circuit Court, asked for Wal-Mart and Take-Two to furnish him with an advance copy of Bully so he could have "an independent third party" play the game and determine if it would constitute a public nuisance in the state of Florida, in which case it could be banned. On October 11, 2006, Judge Ronald Friedman ordered Take-Two and Rockstar to provide the court with a copy of the game within 24 hours. On October 13, 2006, Friedman subsequently ruled in favor of shipping the game, noting that there was no content in the game that was not already on late night TV. Thompson responded to the ruling with a fiery speech directed at the judge. Similar attempts to have the game banned have also been made by the charity Bullying Online and Labour Party MP Keith Vaz in the UK. Later before the launch, Thompson wrote a letter to ESRB stating that Jimmy is able to kiss boys and said "Good luck with your Teen rating now". The ESRB responded saying they were already aware of the game mechanic.
When given a preview build, the mainstream media took a generally positive opinion of the game. Press coverage has described the game as free-form, focusing on building a social network and learning new skills from classes, with strictly enforced punishments for serious misbehaviour.
Labour MP, Keith Vaz argued that Bully be banned or reclassified as rated 18 in the UK before its publication and before the content had been finalized, the game was released rated 15. Currys and PC World, both owned by DSG International, said that they do not wish to sell the game in the UK because it is "not appropriate for Currys' family-friendly image". The official statement lists what Currys believes is "the explicit link between violence and children" as the reason behind the ban, and continues: "We haven't taken this decision lightly, particularly considering the excellent relationship we have with Rockstar." However, despite this decision, other high street retailers, including GAME, HMV, Woolworths, and Virgin Megastores, have all announced an intention to stock the game. DSG stores still stock other Rockstar games including the GTA series, and other violent games like Manhunt, which both have BBFC 18 ratings, whereas Bully has a BBFC 15 rating.
Bully was banned in Brazil. In April 2008, Brazilian justice prohibited the commerce, import, and availability of the game in Brazilian houses. The decision was taken by judge Flávio Mendes Rabelo from the state of Rio Grande do Sul based on psychological findings by the state psychology society which claims that the game would be potentially harmful to teenagers and adults. Anyone caught selling or even owning the game would face a daily fine of R$1,000.00. Despite this, there are many pirate copies of Bully around Brazil. The ban was lifted on 23 June, 2016.