Chicago (AFP) - Two toddlers were hospitalized in serious condition after a playmate accidentally shot them with a loaded gun at a daycare in the US state of Michigan.

The condition of both three-year-olds were upgraded from critical a day earlier, police said Thursday, as they wrapped up their investigation and planned to meet with prosecutors to consider charges.

The accidental shooting took place Wednesday at a private home that functioned as a daycare in the Detroit suburb of Dearborn, when a child managed to get a hold of a loaded handgun.

One toddler was shot in the shoulder and was expected to make a full recovery, police said, while another was in serious but stable condition. Police did not detail the second child's injuries.

"The Dearborn police department has conducted interviews with all parties involved and are in the process of completing the investigation," police said in a statement.

"Investigators will be meeting with (prosecutors) to determine whether or not charges will be filed in this case."

As many as 1.7 million American children live in homes with an unlocked, loaded gun, according to the Brady Campaign to Prevent Gun violence, and the incident was the latest case of children being injured by unsecured firearms.

Nearly 1,300 children die and 5,790 are treated for gunshot wounds each year in the United States, according to a recent study published in the medical journal Pediatrics.

Michigan state law does not prohibit guns at home child care facilities, but requires them to be unloaded and stored in a locked location away from children, according to the state's Department of Licensing and Regulatory Affairs.

The Dearborn child care was run by Samantha Eubanks, herself a mother of six who regularly took care of other children, according to neighbors and family members.

Eubanks was unlicensed, but authorities said it was still unclear whether her child care service met the criteria requiring licensing.

US media reported that police recovered multiple firearms from inside the home, but a woman identified as Eubanks' sister said she did not permit her husband Tim to keep weapons in their home.

"She would always say don't you ever bring a gun in this house, it's not going to happen," Ashley Escobedo told assembled reporters at the scene.