Authorities in Beijing's Chaoyang district opened an investigation into the RYB Education New World kindergarten on Wednesday after parents said toddlers had apparent needle marks and were given mysterious pills.
China's state-run Xinhua news agency said children were also "reportedly sexually molested" but gave no further details.
Officials have so far declined to confirm or provide more details about the allegations against RYB, which is run by a company that started trading on the New York stock exchange in September.
But the incident prompted the education steering committee of China's State Council, its top administrative body, to call on Friday for an "immediate" investigation into all kindergartens across the country.
A 22-year-old teacher from Hebei province surnamed Liu was detained on Saturday "on suspicion of abusing those under her care", the Chaoyang district branch of Beijing's public security bureau said in a statement posted to its official social media account.
The kindergarten is located adjacent to a large military base and rumours have flown online that military officials there were involved in sexually abusing the children.
The statement said a 31-year-old woman from Beijing, also surnamed Liu, had also been detained two days previously for "using the internet to fabricate and disseminate fake news".
It added that the woman had expressed "deep repentance" for fabricating the story that military personnel, from what she called the "Tiger Group", were abusing children -- and for spreading these "illegal facts" on the popular Chinese social media platform Wechat.
The husband of the school's director was once an official at the base, its political commissioner told the PLA Daily on Friday, but said there was so far "no evidence" that military personnel had been involved in the abuse.
RYB's CEO Shi Yinlai apologized "deeply" for the "severe disquiet" caused by the accusations on Friday evening, said CGTN, the English-language news channel of state broadcaster CCTV.
"If any wrongdoing is found, we will not shirk the responsibility," she said, according to CGTN.
RYB Education directly operates 80 kindergartens and has franchised another 175 in 130 cities across China for children ranging from newborns to six-year-olds, according to its Nasdaq listing.
RYB already apologised in April and suspended the head of a Beijing kindergarten after admitting that teachers committed "severe mistakes". The Beijing News had obtained videos showing teachers throwing a child on a bed and kicking another in the back.
The People's Court Daily reported that two teachers from a RYB kindergarten in northeast Jilin province were sentenced to 34 months in prison for jabbing children in the head, inside their mouths, and on their legs and buttocks with sewing needles in October 2016.
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