Jigsaw Pre-school in Fareham, Hampshire, was asked to reduce the time children spent outdoors to just two half-hour periods a day after complaints from one local resident in September.
Environmental health officers said the pre-school could be served with a noise abatement order if it failed to comply. The order carries a 5,000 fine if breached.
Representatives from Fareham Borough Council and Hampshire County Council held a meeting last Thursday to discuss the situation.
Although no immediate action was taken to restore the nursery's normal outdoor play, Matthew Charters, county co-ordinator for early years and childcare, was hopeful that a 'mutually acceptable, long-term solution'
would be reached.
Mr Charters said, 'Our main concern is that children are allowed free access to the outdoors. But the setting is very close to people's gardens and people have their own views on what level of noise is acceptable.
'We will arrange a second meeting to find a solution which involves the children being outside for longer. However, this may be on a trial basis to start with.'
The school grounds charity Learning Through Landscapes has submitted a letter to Hampshire Council expressing its concerns over the restrictions and claiming that children must have at least one hour's continuous access to the outdoors for good- quality play to take place.
Sally Pratt, co-supervisor at Jigsaw Pre-school, said, 'Thirty minutes of outdoor play is not long enough - the staff are finding it difficult and the children are climbing the walls. There has only been one complaint and the other neighbours are very supportive of us. I hope we can get together to find a solution.'
Meanwhile, Ms Pratt said Jigsaw would take its own action to reduce noise, including planting shrubs to absorb sound.