Photographs appeared on Facebook of Angela Riding, along with Preston Crematorium staff, showing the prop in various poses in the chapel.
Town Hall bosses received a complaint after the pictures were posted, sparking an investigation and the suspension of three council workers.
Council chief executive Lorraine Norris described the pictures as “wholly inappropriate”. But Angela Riding, who conducts funerals, said the skeleton belonged to the man who died, and she had been asked to give an “unconventional” funeral. “All I’ve done is what the family requested”, she said.
“My error was to put it on Facebook.”
She added: “I was asked to do a service and I went to see the family, and the guy who had died owned a skeleton. It was his best friend.
“His last wish was he didn’t want a conventional funeral.
“So I gave him an unconventional one with the skeleton sitting in the front row, because that’s what the family asked me to do.”
She said there was even a selfie of the man who died with the skeleton printed in the order of service.
Ms Riding said the pictures had been taken about 20 minutes before the service, after she had asked crematorium staff for help to set it up.
She said: “It was my error of judgement putting it on Facebook, but I did it because I was proud of doing something different. My Facebook is set to private, there’s only my family and friends on it.
“People have been commenting on it saying it’s a fitting tribute.”
She described the council workers as “professional”, and said: “They would not have allowed me to do that if they thought it was me being stupid.”
But a complaint was made to Preston Council, and one person described the taking and posting of the pictures as “disgusting” and “upsetting”.
Lorraine Norris, chief executive of Preston Council, said: “The council has to operate with complete trust and integrity especially at the crematorium.
“This may have been a moment of stupidity but these pictures show a complete lack of respect.
“The council, but more importantly the people of Preston, have been let down by the actions of these staff.”
Coun Peter Rankin, leader of Preston Council, added: “I want to apologise to the people of Preston.
“Words cannot begin to express how upset and angry I am at the actions of these staff.
“We expect staff to behave in a professional and respectful way at all times.
“It’s deeply distressing, disturbing and quite frankly sickening.”