Rasa News Agency reports - The seminary is run by controversial hardline cleric Maulana Abdul Aziz, the imam of the city's Red Mosque, once notorious as a hideout for hardliners with alleged militant links.
The mosque was the scene of a week-long military siege against radicals in 2007 which left more than 100 people dead and unleashed a wave of Islamist attacks across Pakistan.
Now the Jamia Hafsa seminary connected to it has named its small library, stocking Islamic texts, in honour of bin Laden, who masterminded the 9/11 attacks in the United States.
"It is true that we have named the library after Osama bin Laden," a source told AFP Thursday, speaking on condition of anonymity.
"He might be a terrorist for others but we do not consider him as a terrorist. For us he was a hero of Islam."
A small printed sign stuck over the library door gives bin Laden's name and refers to him as a "martyr".
Bin Laden was killed in a US special forces raid in the Pakistani town of Abbottabad in 2011 and for some radicals in the country he is a heroic figure.
On the first anniversary of his death, hundreds of people took to the streets to pay tribute to him.
The Red Mosque raid was one of the triggers for the Pakistani Taliban's bloody insurgency, which has claimed more than 6,800 lives in the past seven years, according to an AFP tally.
Voice of Russia