The incident happened at the kindergarten in the Austrian city of Linz where the five-year-old had pushed a Lego brick into the girl's panties.
Austrian police confirmed that because of the complaint, they had been forced to investigate although the report that was then filed to prosecutors was rejected for any further action.
Like many other countries, police investigate when there is a complaint of a crime, but make no decision on what action to be taken as a result of the evidence gathered.
It is the prosecutor's office which then makes a decision on what action is to be taken after seeing the police report.
Prosecution spokesman Philip Christl said: "In cases involving youngsters we never prosecute. Typically this is the case right until the age of 18. There are exceptions for older children but usually there will be no prosecution."
After the prosecution informed the parents that they were unable to take any further action over the complaint, they announced that the three-year-old girl would be moved to a new nursery school.
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Story courtesy of Central European News