Mary Steven, 47, of Kirktonholme Nursery in Shettleston, Glasgow, satthe boy on the floor after taking the toy away from him.
The tribunal heard that the manager of the nursery, Elizabeth Cairns,said she was unhappy with the way Ms Steven had dealt with thesituation. Her office was next door and she said she had seen theincident.
Ms Steven, who had worked at the nursery for four years, deniedmistreating the child. She was asked to go 'into the office' and wasthen dismissed.
Her letter of dismissal, dated 14 August, 2007, stated, 'The incidentthat occurred in the nursery - namely the mistreatment of a child inyour care - is viewed as gross misconduct by the company.'
The tribunal heard that Ms Steven had previously received a warningconcerning alleged mistreatment of a child in July 2006.
The Glasgow tribunal said her previous warning had expired and ruledthat the dismissal was automatically unfair, as the nursery had failedto operate the standard disciplinary procedure.
Tribunal judge James Young further found there was no evidence tosuggest Ms Steven had been guilty of mistreatment of a child in hercare.