An 18-month-old boy from Newcastle in New South Wales state became the fourth Australian child hospitalised in recent weeks after allegedly swallowing beads from the popular product, Linda Burney, the state's fair trading minister, said.
Six more families in the US also reported their children ill, adding to two earlier cases.
Peter Mahon, a spokesman for Moose Enterprises which sells the toys in Australia, said the company was conducting an internal investigation to determine how the chemical came to be included in Bindeez and Aqua Dots, which are made at the same factory in Shenzhen in China's Guangdong province.
He said the "ingredients were switched at the point of manufacture without Moose's knowledge".
'Date rape' drug chemical:
Aqua Dots or Bindeez beads
Dizzy Ducks music boxes, Winnie-the-Pooh spinning tops, Big Red wagons, Dragster and Funny Car and Duck Family wind-up toys, Pull-Back Action Toy Cars
Spin Master, the Toronto company which distributes the toy in North America, said it had recalled Aqua Dots from Canadian retail stores as well.
And in Hong Kong, toy sets were seized and tested on Thursday, a customs official said on condition of anonymity.
Scientists said when the beads are ingested, a chemical coating metabolises into the so-called date rape drug gamma hydroxy butyrate, which can induce unconsciousness, seizures, drowsiness, coma and death.
The latest toy recall comes just weeks before the crucial Christmas holiday season for toymakers, dealing yet another blow to a Chinese toy industry already plagued by numerous recalls and fears over the safety of its products.
Aqua Dots had been one of the few bright stars of the toy-selling season, even being named Australia's 2007 toy of the year.
The item, which had been heavily advertised in the US, appeared on many toy experts' list of must-have holiday toys, and retailers are now in the midst of cancelling advertising and scrambling to find a suitable replacement.
Also this week, the US issued recalls for about 403,000 toys with paint containing excessive levels of lead, including 380,000 Pull-Back Action Toy Cars.
Other warnings were for Dizzy Ducks music boxes, Winnie-the-Pooh spinning tops, Big Red wagons, Dragster and Funny Car toys, and Duck Family collectible wind-up toys.