Footsteps Stafford, a nursery in Newport Road, Stafford, with 145 children on roll, was given the rating by Ofsted following an inspection in June.
A newly-published report discussing the findings has highlighted a string of concerns.
Inspectors said recruitment processes did not ensure that newly appointed staff are suitable and staff failed to supervise children properly while they are eating, putting children's safety at risk.
There were also criticisms about the premises not being adequately maintained and the quality of education for younger children being poor, while inspectors said there was no access to running water in the baby unit and younger children did not have access to toileting facilities.
A potty was available but was emptied into a sink used by staff for handwashing, Ofsted said.
Inspectors also noted that managers and staff did not ensure that the premises was suitably clean and hygienic, children's bathrooms were dirty and safeguarding arrangements were described as "not effective".
They said staff were not alert to children's basic care needs and didn't always recognise or respond to children who had wet clothing or needed their noses wiping
Issues with medication procedures were also highlighted, with Ofsted saying they were not well enough understood by staff to ensure children's safety and welfare.
The report said: "Children's safety and welfare is significantly compromised. Recruitment processes do not ensure that newly appointed staff are suitable. Staff lack understanding of their roles and responsibilities, which means that children are not safeguarded.
"They fail to supervise children properly while they are eating, which puts children's safety at risk.
"The premises are not adequately maintained, and the provider has failed to ensure that there are basic facilities to meet the needs of children."
The report added: "The quality of education for younger children is poor. Staff provide very few resources for them to choose to play with. Consequently, some children occupy themselves by pulling themselves up on doors or chairs. Staff fail to recognise the emerging skills children show.
"They do not provide them with opportunities to practise standing and walking that will help them to make progress in their physical development. Young babies sit down where staff place them.
"Those who are mobile wander around aimlessly. At times, younger children get bored, and some become upset.
"That said, older children access a broader range of activities. They take turns in learning how to use tools safely to cut sticks from a branch."
Footsteps Stafford's response
A spokesperson for Footsteps Stafford said: “Our highest priority is the safety, wellbeing and education of our children and we are committed to responding to the inspection findings.
“A robust action plan has been drawn up to respond to concerns raised by the inspectors and we have already improved our hygiene and safety standards.
“We have reviewed comments from the inspector and are confident we have strengthened our processes around staff inductions, medication procedures and mealtimes.
“We are working to improve the education offering for the children and further embedding our curriculum.
“We welcome the inspector’s observations that the older children access a broad range of activities – including learning about the safe use of tools and early mathematical skills – and that parents are happy with our communication with them.
“We are committed to the highest standards of care and are determined to make improvements as quickly as possible.”