Tiya Chauhan was found unconscious on the morning of 23 August 2012 at the Dundonald Road Dicky Birds nursery in Wimbledon and died the following day.
Mathew Hill, a senior officer at Ofsted, told the inquest at Westminster Coroner's Court that a child was likely to put a jelly cube in its mouth.
'A child is likely to want to put it in its mouth,' he said. He told the inquest that he did not think that it was possible to properly supervise children from the next room.
'I always felt that our position, from the evidence that we had available, was that supervision from the room next door was not sufficient, 'Mr Hill said.
When asked by the coroner Dr Fiona Wilcox whether the nursery had failed to fulfil its statutory obligation, Mr Hill replied, 'Yes.'
'That could be the case here because Tiya managed to put something in her mouth.
'I think that the conclusion that Ofsted came to is that something happened, there was clearly a set of circumstances that led to staff members not being engaged and directly supervising those children.
'There certainly did not seem to be an awareness between these staff on what was due between them, in terms of their eyes being turned away from whatever was going on.
'In Ofsted's view there was a failure of supervision at that time and then decisions were made in terms of the ongoing registration, on that basis.'
Asked if this led to Tiya's death, Mr Hill replied, 'It certainly was a large factor in it...there was nobody there to respond to Tiya before - really - it was too late.'
'Nobody was suggesting to us that individual staff members were particularly at fault ,' he added.
The inquest, which is ongoing, has also heard Derek Hayes, operations manager at Dicky Birds, accused of trying to hide what had happened at the nursery and for failing to properly supervise Tiya during a free flow play session.
The inquest heard that no adult saw Tiya take the jelly from the table, put it in her mouth or see or hear her choke.
Asked whether he thought there had been adequate supervision by Prashant Popat, who was representing Tiya’s parents, Mr Hayes replied, ‘I blame the jelly. I feel the problem wasn’t about supervision, this was about an instantaneous thing. Jelly was out and we didn’t know it could case instant asphyxiation.’
It was also claimed that he had ‘deliberately minimised’ the incident on a report for Ofsted and put down inaccurate information on the number of staff that were present at the time.
On the report for the local authority the day after the incident, Mr Hayes wrote that three staff were based throughout the room when only two were present and no-one was supervising Tiya.
Dr Wilcox told Mr Hayes, ‘On the allocation sheet at the time of the incident there were two staff, which isn’t what you have written.’
‘At the time Tiya was found there may have been no staff.
‘There is nothing to indicate that when this child was found there may not have been any members of staff.’
Mr Hayes said that he had ‘panicked’ and did not know what to put.
He also suspended a nursery assistant to appease inspectors, it was claimed.
Ofsted had ordered that the nursery close for six weeks, but Mr Hayes wrote to the local authority with some self-imposed regulations and was allowed to re-open the nursery after two weeks.
The conditions included no free flow play and no jelly in play or on the nursery menu.
The nursery promised to suspend staff that had been involved in the incident, but just one member of staff, nursery assistant Natasha Collins, was suspended.
The nursery worker had been in an adjoining room and had a limited view of Tiya.
Mr Hayes admitted that Ms Collins had done ‘nothing’ to deserve being suspended, but that he had had to suspend someone and had picked her, because she was ‘distressed and really ill’ and had annual leave.
‘My priority was to reopen the nursery. If I had applied any kind of logic to it I would have had to suspend half of the nursery,’ he said.
Dicky Birds is a family-owned business and operates nurseries in Wimbledon, Raynes Park, New Malden and Surbiton in south London.
The inquest has now been adjourned until September.