Firefighters were called to a daycare in the Bloor Street West and Ossington Avenue area at about 10:30 a.m. ET.
The affected daycare is run by Network Child Care Services and is housed in the Ossington Avenue Baptist Church on the southwest corner of the intersection.
The children and staff were evacuated from the building safely. They were examined by emergency medical services.
Spyros Volonakis, the executive director of Network Child Care Services, told CBC News that four staff members and one child were taken to hospital for observation.
The rest of the children are now at another daycare further north on Ossington Avenue.
Toronto Fire District Chief Ernie Thorne told CBC News that six fire trucks were dispatched to the building that was evacuated.
Gas was shut off in the building that was evacuated and the carbon monoxide level was no longer elevated.
Fire crews left the scene in the early afternoon, but, the source of the leak remains unknown.
Thorne said the church had turned on its furnace this weekend, but it was not immediately clear if that was related to the carbon monoxide issue.