Officials from the Kiddie Academy in Morgan Hill, Calif., told police Deborah Gratz put Sominex, an over the counter sleeping aid, into the cups of some of the children.
KTVU-TV, Oakland, said a witness saw Gratz put an unknown substance into cups.
The children were 1- to 2 years of age.
Gratz, 59, has worked at the facility for five years and was arrested Monday after a search of her home in which police found relevant evidence, KTVU said.
Gratz was booked in the Santa Clara County jail on felony charges of child endangerment, KTVU said.