Swiss-based food giant Nestle has ordered the recall of baby milk from France, Spain, Portugal and Italy after tests suggested chemical contamination.
Italian authorities are seizing baby milk cartons across the country
Police in Italy, the largest market of the four, have begun seizing 30m litres of the baby milk from shops and depots.
The alarm was raised after traces of a chemical involved in the printing process were found in samples in Italy.
Nestle denies the chemical poses a risk to health but has recalled the cartons, with an expiry date of September 2006.
The scare began in June when a sample of liquid baby milk produced by Nestle showed traces of isopropyl thioxanthone, a photographic chemical known by the initials ITX.
The chemical is used in the printing process of the milk cartons, but appears to have made it into the baby milk itself.
The Italian authorities have said the chemical may be toxic.
A Nestle statement on the recall said: "This decision was taken as an extreme precautionary measure to reassure consumers.
"Nestle believes that the level of ITX measured in the tested produce does not represent a health risk."
Nestle spokesman Francois-Xavier Perroud said only 2m litres had been recalled in Italy, less than the 30m ordered to be seized by the authorities.
A company spokesman in Switzerland said a new packaging process had been put in place to prevent contamination.
The BBC's Imogen Foulkes in Geneva says contaminated baby milk is a food producer's worst nightmare and perhaps most of all for Nestle, which has attracted controversy over its baby milk in the past.
For years Nestle has had a serious image problem because of its promotion of powdered baby milk over breast feeding in the developing world, where many new mothers have neither the money to buy the formula nor the clean water to prepare it, our correspondent says.
Contaminated milk is a different issue, she says, but it still puts one of Nestle's top products in a negative light once again.
Nestle has said it does not expect the recall to affect company-wide results - but with a product as sensitive as baby milk that is perhaps a little optimistic, our correspondent adds.
Italy's forestry police - which is responsible for agriculture - initially seized 2m litres of milk for infants on 9 November.
The wider seizure was ordered after subsequent tests showed all Nestle baby milk cartons with an expiry date of September 2006 were contaminated, the Italian news agency Ansa reports.