The 37-year-old man told the police he had given the children a sedative to keep them quiet.
He was arrested on Sunday morning after witnesses called police and reported seeing the refugees and their children crammed into the back of the van between Weiden and Podersdorf.
Police tracked the van down and arrested the driver in Mönchhof. He is being held in custody in Eisenstadt.
On Monday police arrested a 45-year-old people smuggler at around 3am on the B10 road in Nickelsdorf. After spotting a suspicious van they stopped it and found 21 Afghans, including two women and six children, in the back. The driver told them he was on his way to Germany and had been paid a triple-digit sum for the trip, police told Austrian media.
Shortly before midnight on Monday a 26-year-old woman was arrested after crossing the Hungarian border. She had four Iraqis in her car who she was bringing into Austria illegally. Police were questioning her on Tuesday.