Dale Layton-Bradshaw, 50, a lecturer at Southfields College in Leicester, said she witnessed the incident during a visit to the pounds 75-a-week private day nursery to see one of her students, who was on placement there.
Mrs Layton-Bradshaw, a social worker with 18 years experience and now a lecturer in child development, asked her student to take her on a tour of Shires Nursery in Melton Mowbray, during which she witnessed the incident.
She and the student were looking through the window of a closed door when they saw a nursery nurse reprimanding a child.
"She was shouting at a little boy who was crying. She was cross, it was loud enough for me to hear and I was behind the closed door. He was crying and sobbing, he was quite upset.
"She put a blanket over the child and tried to lay him down, but the child removed the blanket, she put it over him again quite forcefully."
She saw other children in the room with blankets over their heads, she said.
Leicester Crown Court also heard that the nursery owner had told a student nurse that she would "not treat her own children" the way she treated those in her care.
Melanie Wildig told the court that Roseina Hurst, who owns Shires Nursery, made the admission to her at the end of Ms Wildig's seven-day work placement there.
Ms Hurst, her deputy, Diane Goddard, and Sarah Hillier, Sally Williams and Susan Duffin, all nursery nurses, all deny charges of child cruelty.
Ms Wildig told the court she saw one member of staff sit across a child and rub his face and head to make him sleep.
She saw children sat on potties outside during October, and told how a member of staff forced food into a child's mouth, and "pushed it down with her fingers" until the child regurgitated it. The trial continues.Reuse content