The owner of the Divino Niño nursery in the Bronx, Grei Mendez, 36, and her tenant, Carlisto Acevedo Brito, 41, were arrested following the child’s death and face federal narcotics possession and murder charges, according to federal prosecutors.
Three other children, who range from eight months to two years old, inhaled fentanyl at the nursery and were admitted to hospital.
Three children were given Narcan, an emergency medication used to reverse opioid overdoses, police said.
Police searched the nursery and found one kilo of fentanyl that was discovered “underneath a mat where the children had been sleeping earlier”, said NYPD chief detective Joseph Kenny on Monday.
Ms Mendez has denied knowing that drugs were being kept in the nursery.
But police said the 36-year-old phoned her husband twice before calling 911 after she found the children ill.
Ms Mendez’s husband, who is the cousin of Mr Brito, then showed up and removed several full shopping bags from the nursery, officials said.
Authorities are still searching for her husband, who has been identified in court documents as a co-conspirator.
“We allege the defendants poisoned four babies, and killed one of them, because they were running a drug operation from a daycare centre,” Manhattan US attorney Damien Williams said on Tuesday.
“A daycare centre - a place where children should be kept safe, not surrounded by a drug that can kill them in an instant.”
A lawyer for Ms Mendez said his client denies the charges. “Her only crime was renting her room to someone who had a kilo,” said attorney Andres Aranda, ABC News reported. “There is no evidence that she did anything but care properly for these children.”
Both Ms Mendez and Mr Brito have been labelled as flight risks by authorities and are being held without bail. They each face life in prison if convicted.
Fentanyl, a synthetic painkiller 50 times more powerful than heroin, has been blamed for a rise in US drug deaths.
Police said the drugs recovered from the nursery could have killed 500,000 people.
At a news conference, mayor Eric Adams called for a “full national assault” on the drug.
“A tenth of a size of a fingernail can kill an adult. So imagine what it could do to a child,” he said.
In 2010, less than 40,000 people died from a drug overdose across the country, and less than 10 per cent of those deaths were tied to fentanyl.
By 2021, over 100,000 people had died annually in drug overdoses, with an estimated 66 per cent of those tied to fentanyl.