The nursery, which cares for more than 100 children, has been closed
A child is being treated in hospital and two others from the same Plymouth nursery are recovering at home after contracting E.coli.
The Health Protection Agency (HPA) says Going Places in Springhill Green, Pennycross, has been closed temporarily while staff and children are tested.
Faecal samples are being taken from children and staff, and anyone who is clear will be allowed to return.
The strain, E.coli 0157, causes stomach pain and upsets and can be fatal.
The nursery cares for more than 100 children.
The HPA said: "We're working hard alongside families concerned, nursery management and environmental health officers to try to establish a source of the illness."
Parents have been advised to take their child to their GP if they show any symptoms, and to inform the HPA.
E.coli 0157 can be spread from person to person easily, so parents of children at the nursery have been given information about signs and symptoms of the infection, which include bloody diarrhoea, stomach pain and fever.
There is no specific treatment for the E.coli 0157 infection.
A statement from the nursery said an inspection had shown no links to the nursery kitchen "or any of our procedures".
There were 137 confirmed cases of E.coli 0157 in the South West region in 2008.