A 20-year-old nursery worker has been arrested on suspicion of child abuse, police said today.
The man, from Nechells, Birmingham, was taken into custody in the early hours of yesterday morning, West Midlands Police said.
Assistant Chief Constable Anil Patani said: "The investigation is in its very early stages, however we believe that we have identified one victim who we believe attends the nursery.
"The family of this child have been told and police are supporting them at this very difficult time.
"As the investigation continues, we will update families with children at the nursery at the earliest possible opportunity."
Police said the man was employed as an assistant at the Little Stars Nursery in Nechells.
A force spokeswoman said the nursery was closed today "as a precaution", adding: "West Midlands Police and Birmingham City Council are in the process of contacting parents and guardians of children registered at the nursery."
Senior police officers and council officials will hold a private meeting for parents later today, police said.
A telephone line offering advice and support to parents and guardians has also been set up. The number is 0121 675 4806.
Police said a number of items, including a computer, were seized at the man's home.
The investigation is being conducted jointly by West Midlands Police and Birmingham City Council Children's Services.
Little Stars Nursery is a day nursery for children under the age of eight, based in the Nechells Regeneration Project in Nechells Park Road.
According to an Ofsted inspection report published last month, the nursery employs 14 members of staff and is attended by 55 children.
The report found that "overall the quality of the provision is good", but said risk assessments had not been completed to ensure the safety of children at the nursery.
It read: "Staff have a good understanding of safeguarding children and of their role and responsibilities in reporting concerns. The nursery has effective procedures to ensure children are safe and their welfare is promoted, for example, appropriate recruitment and vetting procedures are in place.
"However, the risk assessments have not yet been completed to ensure children are always in a safe and suitable environment."
A Birmingham City Council spokeswoman said: "We are working closely with West Midlands Police and will continue to keep parents informed as to the situation."
Superintendent Matt Ward said the man, who has worked at the nursery for 18 months, was arrested after a warrant was executed at his home for an unrelated matter.
Speaking to reporters at West Midlands Police headquarters in Birmingham, he said: "As a result of that unrelated warrant being executed we recovered material which, when it was forensically examined, led us to believe a series of serious sexual offences against a child had taken place at the Little Stars Nursery."
He said he had spoken earlier today to parents of children at the nursery, who were "clearly very angry and very shocked". He added: "At this stage all our evidence suggests there is one offender and one child."
In a statement released by police, John James, chief executive of the Nechells Regeneration Project, said: "We were shocked to hear of the allegations made and we are, of course, co-operating fully with the police inquiry.
"We have been successfully operating this nursery for five years and are an established part of the community and are grateful for the support we are receiving from that community during this time.
"The safety and welfare of the children and the community we serve is our first priority, and in the circumstances we fully support the decision by the police and Ofsted to temporarily close the nursery during the initial stages of this investigation.
"Our thoughts are with the children, parents and the hard-working staff of Little Stars Nursery."