Investigators found "abnormal" levels of lead in the blood of 233 children at Peixin Kindergarten in Tianshui city, according to state broadcaster CCTV.
Of those, 201 of the children are being treated in hospital.
Food safety scandals were once common in China, where tainted milk formula made hundreds of thousands of babies ill in 2008 and was linked to six deaths.
City authorities investigated the head of the kindergarten last week after receiving reports that children were falling ill.
A parent told state-run Jimu News tabloid last week that children had been experiencing stomach pain and nausea, and that some of their teeth turned black.
Testing revealed that samples of three-colour steamed date cakes and corn rolls contained more than 2,000 times the national safety standard for food contaminants.
The cake, served at breakfast, returned a reading of 1,052 milligrams per kilogram and the roll, served at another meal, was found with 1,340 milligrams per kilogram.
The nationwide limit for lead in wheat and starch is 0.5 milligrams per kilogram, according to Chinese government records.
CCTV said security footage shows kitchen staff adding packaged yellow colouring to a flour mix used in both contaminated dishes.
The kindergarten's principal, surnamed Zhu, and an investor surnamed Li have been detained along with six other people, CCTV said. Two others are on "bail pending trial".
Investigators found that Zhu and Li allowed kitchen staff to produce food using paint pigments purchased online that were later found to contain lead and were marked inedible.
Testing among children attending other kindergartens linked with Peixin returned normal results.
Food safety standards have generally improved across China but revelations last year that cooking oil had been transported in containers also used to carry fuel sparked outrage across Chinese social media.
Related Links
Our Polluted World and Cleaning It Up
| Subscribe Free To Our Daily Newsletters |
| Subscribe Free To Our Daily Newsletters |
