The Toybox Day Nursery had its registration suspended following an inspection on Tuesday, to allow urgent staff training to take place.
The setting, open to the children of up to 4,000 members of staff at Salisbury NHS Foundation Trust in Wiltshire, was previously rated good following a 2014 Ofsted inspection.
It also holds the Bristol Standard Quality Improvement Award.
The trust, which runs the nursery, said in a statement, ‘The Trust can confirm that Ofsted has suspended the Toybox Day Nursery service which provides nursery support to its staff.
‘Ofsted has suspended the registration because staff do not have a sufficient understanding of their roles and responsibilities in relation to safeguarding children.
‘This potentially puts children at risk of harm. The Trust is working closely with Ofsted and Wiltshire Council to address the situation as quickly as possible.’
An Ofsted spokesperson said, ‘The registration has been suspended as a result of concerns about the adequacy of the safeguarding arrangements at the nursery.
‘The suspension is to allow time for the circumstances to be investigated and for steps to be taken to minimise or eliminate the risk of harm.’
The watchdog did not confirm how long the suspension was likely to be in place at the setting, which looks after children aged three months to five years.
The 2014 report praised the ‘strong emphasis on safeguarding children's welfare’.
‘Consequently, children are safe, secure and settled,’ it added.
According to the report 173 early years children were on the roll at the setting operating from two purpose built units at Salisbury District Hospital, Odstock, with seven playrooms, and offering support for children with special educational needs and children who speak English as an additional language.
There were 42 staff who work with the children, including one with Early Years Professional Status and one with Qualified Teacher Status, with most others qualified across a range of levels.
In recent years, the nursery celebrated the opening of a new £25k garden and play area, funded by the Salisbury Hospital League of Friends.
At the time, league chairman George Todd said, ‘It is vital that Salisbury District Hospital is able to retain their hardworking staff to look after the patients and, to have a facility on-site for taking care of their young children while they are working, is hugely important.’