Kayley Powell and John Steward were allegedly in a parked vehicle outside Springhead Infant and Nursery School in Oldham, Greater Manchester, at 2.50pm in February.
The head teacher tapped on the window after being alerted by a parent.
Steward suddenly jumped back into the passenger seat as they both said "We are doing nothing" in unison, the court heard.
The 62-year-old was then seen to be 'visibly shaking' whilst smoking a cigarette as Powell told a pastoral care worker: ''If anything has been going on I am 27. I'm an adult.'', it is alleged.
Powell, now 28, and Steward, now 63, both from Oldham deny outraging public decency, the Manchester Evening News reports.
Melanie Montgomery who was maternity leave from her job at the before and after school club, said she about to pick her son from classes when she noticed Powell and Steward in a nearby car.
She told the jury: "I saw a gentleman and he was moving his arm quite fast and it was obvious that it was between the girls legs.
"She was on the drivers side and he was on the passengers side, they were parked behind me and I was using the rear view mirror to see them.
''His head was back but her body was moving. It was as if she was asleep. She just wasn't moving but his hand was making her move.
"They didn't stop until someone walked past, I kept looking away and I rang my partner.
"My concern also was for the lady she just looked out of it, dead, it was really, really strange. I went down to the school and I reported it to reception.
"My concern was for the lady because I didn't know if she had been drugged or something.
"The fact that it was outside a school as well, it was just horrible and disgusting."
"Even though I couldn't see where his hand was going I knew what they were up to.
"I was confused because if she was out of it how could she drive, but she could have taken something after she'd driven.
The trial continues.