Parents were being asked to pay the fee so that their children at the Jiangdu District Shangmao Kindergarten are hugged by teachers when they arrive in the morning and again when they leave, the Shanghai Daily reported.
The school in Yangzhou city charged 80 yuan ($12) per month per child for the hug.
News about the hug charges was posted online, and parents were told by teachers that hugging will put their children in a good mood.
The kindergarten explained that the service was part of a "quality education trial" to show that children feel loved and have their confidence raised when they receive hugs from teachers.
But local education authorities said such a practice violates rules and the kindergarten should return the money to parents.