Nazila, 35, and Lida Sharaf, 33, were charged by Alameda County, Calif., prosecutors on three counts each of felony child neglect and abuse and four counts of misdemeanor child neglect and abuse for swaddling babies so tightly they struggled to breathe, the San Francisco Chronicle reported.
The state Department of Social Services has shut down the Universal Preschool LLC in Livermore in response to the charges.
Nazila Sharaf was the licensee of the day-care center and Lida Sharaf was the director.
Investigators were tipped off when an employee "quit in disgust" after she witnessed the Sharafs' treatment of three boys and four girls in their care.
The children in question were seven to 11 months old, but experts recommend swaddling for babies under six months.
Officer Steve Goard of the Livermore police said in some cases, the sisters placed blankets over the faces of the babies during naptime, a practice that could have blocked their airways.
"This was not a case of mere swaddling," police said, "but a case of abuse and neglect where the victims were being restrained."
The sisters are being held at Santa Rita Jail in lieu of $700,000 bail.