John Rosa, president of the Citadel college, said he found the images "offensive and disturbing".
The cadets wore the hoods and all-white clothing as part of a Christmas skit.
The Citadel Minority Alumni Association shared one of the photos on its Facebook page, calling it a "disgrace".
In it, seven cadets are seen wearing the pillowcases. Another cadet is also seen with them.
Founded in the aftermath of the US Civil War, the KKK is notorious for targeting black people with lynchings and cross burnings.
"These images are not consistent with our core values of honour, duty and respect," said Mr Rosa in a statement. An investigation is underway.
The alumni group said it was pleased at the South Carolina college's response but added more needed to be done "to address the culture that continues to house recurring prejudices against minority cadets".
A previous incident in 1986 saw five cadets dressed in KKK robes drag a burning cross to a black cadet's room, the Washington Post reported.
A top US military college says it has suspended eight cadets seen in photos wearing pillowcases resembling hoods worn by the white supremacist Ku Klux Klan.