Shining Stars Day Nursery, on Clare Road in Halifax town centre, has been rated 'Inadequate' following a visit from the education watchdog.
An inspector's report, published on Friday, said the nursery's staff fail to manage disruptive behaviour and support children to develop an understanding of right from wrong.
"This leads to a disorderly environment that hinders children's learning," said the report. "Children are frequently in conflict with one another. The less confident children become distressed, showing that they do not feel safe and secure in the nursery."
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It also said risk assessments are not sufficiently effective, with accidents recorded by not acted on promptly afterwards.
"For example, children are able to open internal doors despite children having previously trapped their fingers in them," said the report.
"Furthermore, some routines and activities do not support children's good health. Babies share resources that have been in their mouths. Staff do not model good hygiene routines to teach children good habits and minimise the risk of cross infection."
The report, written by an inspector who visited in April, also criticised the lack of curriculum planning but said staff do know what children are interested in and arrange some activities which are "really appealing to children".
The report also said children have opportunities to develop their large physical skills, babies demonstrate that they feel secure and are happy in the setting, and parents are complimentary about the nursery.
Paul Wanklyn, Company Director at the nursery, said: "Whilst we respect the report findings, we are very disappointed with the outcome.
"We have already taken steps to improve the areas noted within the report and we are fully committed to resolving all the points raised.
"Following the inspection, we immediately began work with our contacts within the Calderdale Council Early Years Improvement Team to create a plan to address each area of improvement.
"Within this plan we have been able to identify strategies for all the areas noted through additional training, changes to procedures and peer coaching.
"We are looking forward to our reinspection, which is expected in the autumn, where we hope to be able to demonstrate the improvements made alongside the good practice already taking place."