Footage of a couple in a sexual encounter was displayed on a large electronic screen located on a busy street close to the mayor’s office.
The video ran for five minutes on Friday before power was eventually cut.
South Jakarta’s head of public information Ady Wiryono Lestari said the incident was “serious”.
Ms Lestari said she did not know how the material appeared or who was responsible.
A police investigation is now under way to determine whether the billboard, which is owned by a private company, was hacked, local media report.
The news was met with amusement on Twitter with users debating whether the footage was the result of an unfortunate accident or a plot by professional hackers.
“Oh Jakarta, you never cease to amaze me,” Pete Cronin wrote.
The city has an issue with the advertising boards with 29 removed in recent weeks for not having the correct permit or license.
On Saturday a billboard is thought to have caused the collapse of a pedestrian bridge, prompting the Jakarta administration to consider banning the screens in areas that pose a risk to the public.