An American woman and her foreign employees were arrested for allegedly operating a nursery without a permit on a Thai island.

Jennifer Keanne Irwin, 40, from New York, reportedly opened the unauthorised daycare centre in a walled-off section of a coconut plantation on Koh Pha Ngan - the notorious Full Moon Party island - in Surat Thani.

Police cracking down on illegal migrant workers in the southern Thai province raided the rented house on March 6 and found 20 foreign toddlers playing on the premises.

The nursery was equipped with desks, chairs, educational equipment, posters, and children's toys.

Officers also found three foreign babysitters - two Israeli women and one Ukrainian woman - as well as four Burmese women working as cleaners.

The nursery owner Jennifer, seen in the video in a red dress, later arrived, but allegedly could not produce the proper business permits when asked by police.

Police Lieutenant Sanguansab Lapsanong of the Surat Thani Immigration Office said: 'The American woman faces charges of establishing or operating a nursery without authorisation.

'Three other foreigners were charged for working in Thailand without a work permit.

'Meanwhile, one Burmese worker was charged for entering the country illegally, two for overstaying and working without permits, and another for not reporting their employment.

All eight suspects have been transferred to Koh Pha Ngan Police Station for further legal proceedings, police said.

The raid came amid a wider crackdown on foreigners running businesses in Thailand following outrage over the case of a Swiss man who kicked a Thai woman for sitting on his beachfront garden steps in Phuket.

Urs Beat Fehr, 45, now faces having his visa revoked as he was deemed a 'threat to social peace'.