The 20-year-old was arrested at his home in Nechells, Birmingham, in the early hours of yesterday.
West Midlands Police said he was arrested on suspicion of serious sexual offences against a child.
A spokeswoman said the initial arrest was unrelated to Little Stars Nursery in Nechells, where the man has worked for 18 months.
Superintendent Matt Ward said material recovered from the man’s address, including a computer, telephones and various other electrical items, led officers to launch a separate investigation into suspected sexual abuse involving a child at the nursery.
“As a result of the 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.
“The investigation is in its early stages but at the moment all our evidence suggests there is one offender and one child at the nursery.”
He declined to comment on the initial allegations that led officers to arrest the man, adding: “That investigation is itself in its early days and it would not be appropriate to comment on that.”
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… 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.”