The head of RYB kindergarten Xintiandi branch in Beijing and a female teacher suspected of child abuse have been fired, the company announced in a statement on Saturday.
RYB said further investigation at the kindergarten will begin immediately in cooperation with police and authorities.
The kindergarten will also communicate with parents and invite mental health experts to provide help for children involved.
On Wednesday, several parents of Xintiandi kindergarten students, all about 3 years old, reported to police that their children had suspicious marks on their bodies that looked like needle pricks, and that they had repeatedly been given white pills.
Beijing police and authorities said on Saturday a 22-year-old female teacher, surnamed Liu, from Hebei province, had been detained and that a 31-year-old Beijing woman, also surnamed Liu, had been detained on suspicion of spreading rumors about molestation.
The Chaoyang district government had ordered RYB Education to immediately dismiss the head of the kindergarten and punish anyone found responsible.
Officials went to the kindergarten to investigate potential safety risks, and the school was asked to communicate with the parents to make certain the children were safe, according to the Chaoyang government.
The education commission of Beijing's Chaoyang district, which oversees the kindergarten, strongly condemned the situation and asked districts and kindergartens concerned to cooperate with judicial authorities for improvements.
"We consider this an extreme case in which children were harmed, generating serious social repercussions," a spokesman for Chaoyang district government said.
A thorough investigation was conducted in Chaoyang to verify kindergartens' qualifications, the district government said.
The Ministry of Education has begun an inspection of kindergarten management nationwide and has told local education authorities to take measures to improve teachers' morality and tighten supervision, according to a news release on Thursday.
Last year, RYB Education was China's largest early years education service provider by revenue, according to industry analysis consultancy Frost & Sullivan.
On Friday, shares in the company plummeted on the New York Stock Exchange by 38 percent by the close of trading, almost wiping out the company's 44 percent gains since it went public in September.
This has been the third reported child abuse case this month. On Nov 13, Shanghai police detained a person surnamed Zheng who was in charge of a day care center where staff were caught on camera abusing toddlers. Three other staff members were detained, according to Shanghai police.
At about the same time, Golden Cradle Education and Technology Group, which has more than 700 kindergartens and schools nationwide, became involved in a similar accusation as parents said teachers at one of its kindergartens in Beijing abused children. Police are investigating, but no details have been released.
