Great Ormond Street Hospital has closed beds and re-scheduled operations after treating too many sick children.
The government intends to look into the hospital's finances
It said no emergency patients would be affected and that the measures had been taken to "minimise any impact to patient care".
It had a shortfall of £1.7m after treating 2% more patients than it had funding for by the end of January.
The government said it would look into its finances, as the Tories and Liberal Democrats accused Labour of failings.
On Friday the world famous hospital closed between 50 and 63 beds - around one fifth of its capacity.
But the trust insisted only a small proportion were closed because of the shortfall - equivalent to about 1% of its annual budget.
It said that because it had "over performed" in terms of the number of patients treated it was "not in a position to continue to provide services above commissioned levels".
"In some areas this has meant reducing bed numbers to reflect in-post staffing numbers, limiting the number of bank and agency staff used."
The spokeswoman said bed usage had been reviewed across the trust to maximise efficiency.
"In some cases this has meant consolidating wards, closing beds and scheduling limited theatre closures."
She added all cancelled operations have been re-scheduled.
Health Secretary John Reid said assurances had been given that the hospital will not turn away seriously ill children.
"While action is being taken to reduce the deficit, the priority is to ensure that any impact on patient care is minimised," he said.
"The trust should be at balance by the end of the financial year."
Tory shadow health secretary Andrew Lansley said: "It is shocking that so important a hospital, providing vital services to children, isn't getting the resources it needs.
"What more telling an example could there be of Labour failing to get resources to the frontline."
Liberal Democrat health spokesman Paul Burstow said the problems Great Ormond faced were "repeated up and down the country".
He accused the Labour government of "dither and delay" in tackling them.