The Muppets are taking over Manhattan — and there’s nothing anyone can do about it.

City officials said yesterday they are powerless to stop Times Square’s growing horde of costume-wearing hustlers, who have plagued the area with a series of creepy and violent incidents, including an alleged Sunday attack on a 2-year-old.

“Dressing up in one of those suits and posing for photos is not a violation of the law,” NYPD Commissioner Ray Kelly said.

The city used to tell the furry fiends where they could set up. But because of a court decision last year, the characters can’t be treated like normal vendors because they provide entertainment, as opposed to a good or service.

“Our ability to treat these characters as vendors was eliminated,” said city lawyer Gabriel Taussig.

“And, absent of vending laws, there is no other law that comes close to dealing with where they can be located.”

The most recent trouble came when Osvaldo Quiroz-Lopez, who was dressed as Cookie Monster, got into a tussle with the toddler son of Bollywood star Parmita Katkar after the mom said she didn’t have the money to tip for a picture.

His bust followed a slew of similar cases, including a man dressed as Super Mario who was accused of groping a woman and an Elmo who went on an anti-Semitic rant.

Tim Tompkins of the Times Square Alliance said there should be a law stopping shady characters.

“I want to reduce the number of totally unregulated, unknown people soliciting aggressively,” he said.

There were more than 50 of the characters out last Saturday, he said — and that number could jump as high as 100 by the time summer comes.

Mayor Bloomberg shrugged off the cartoon creeps.

“We have tried at various times to regulate people who dress up and then get you to take a picture with your kid and then demand money or harass you in other ways,” said Mayor Bloomberg. He noted that even though they take money, “it’s not against the law. So I’m sorry. Maybe it should be.”

Yesterday, City Councilman Peter Vallone (D-Queens) took a shot at cracking down on the creeps, introducing legislation that would require the costumed people to register .

But Council Speaker Christine Quinn isn’t so sure there is much that can be done.

“It’s very challenging legally because dressing up in a costume and walking around Times Square is, we believe, a First Amendment-protected activity,” she said.