Gorringe Park primary school in Mitcham, south London, claims it is unique in being the first school to build and run its own baby unit, in response to demand from parents who have children at the school.
The unit, called Little Penguins, is registered with Ofsted to cater for 30 babies from three months to three years.
The addition of the unit means that as the school also has a nursery class it can offer children continuity of care from infancy until age 11.
Bursar Lynn Honder-Cole said that the school had initially applied to the local authority for extended schools funding to set up a baby unit, but was turned down. 'I came up against a brick wall when I was trying to find funding,' she said.
Instead the school has paid for the 80,000 cost of the baby unit with income from its breakfast and after-school clubs and playschemes.
The baby unit was converted from modular buildings previously used as temporary classrooms at another school in the borough. These have been refurbished into a sleep room, playroom, office, kitchen and toilets.
The unit is inside the school grounds and has safety gates, an entry system and a webcam for parents.
Ms Honder-Cole said that parents felt comfortable sending their children to the unit because they knew and trusted the school, and another attraction for them is that the headteacher is ultimately responsible for the baby unit.
The unit's staff, who are employed by the London borough of Merton, have level 2 qualifications and above and most previously worked in private day nurseries, including the manager.
There are currently 11 babies at Little Penguins but the number is set to rise to around 20 in January. Babies with siblings at the school are given priority. The unit is open 50 weeks of the year, from 8am until 6pm. From January it will open from 7.30am to 6.30pm if demand warrants it. Little Penguins does not offer part-time provision.
A place for a baby under two years costs 32 a day and for a two- to three-year-old 28 a day, or 160 and 140 a week respectively.
This is slightly below the cost of a typical nursery place, according to Daycare Trust figures published last January which put the average cost of a nursery place for a child under two in outer London at 169 and for a child over two at 147.
Ms Honder-Cole said, 'We're not out to make a profit and that's why we can offer affordable care. We just have to cover our costs.'
But Rosemary Murphy, chief executive of the National Day Nurseries Association, said, 'This will sound alarm bells for private and voluntary providers who will wonder if it is the tip of the iceberg.
'At the moment we are seeing a huge gulf between statements from the very top of Government and what is happening on the ground locally. Only last week Tony Blair talked about working in partnership with the private and voluntary sector to develop our childcare around schools. Yet here we see a school determined to make a feature of working in isolation.
'Serious questions need to be asked about whether there was a full needs analysis and local impact assessment before this development.'