Eleven sick babies are being cared for in a playroom at Middlemore Hospital because it has run out of space in the regular wards.
The number of beds for older children is also down, leaving families and already-busy staff stressed as they decide who can be admitted and who should be cared for at home.
The bed cuts were because of building work taking place and come as a big spike in respiratory illnesses hit the hospital.
Counties Manukau district health board said the hospital was initially down 26 beds across both neonatal and paediatric care.
But since a surge in sick children about three weeks ago, it set up 11 beds in the playroom, a spokesperson said.
RNZ was told the playroom was set up nicely, with armchairs for parents and a divider between cots.
A treatment room usually used to bath children with conditions like burns has also been converted for two beds, a source said.
Nine days ago, the children's emergency department had its busiest day ever, with 140 patients through in 24 hours.
The shortage of beds in the ward was adding to the ED problem, with children having to stay longer in emergency while they waited for space to become free in the ward.
Staff told RNZ the situation was very stressful as they made decisions about who to admit and who to send home.
A GP at Papakura Marae Health Clinic, Matire Harwood, said doctors in the community were facing similar quandries.
She had a patient last week who she monitored in her clinic because she knew Middlemore was so busy.
When the girl did not improve, she sent her to the hospital.
"The specialists there are wonderful and took her without any hesitation, knowing I'd tried to manage her as long as I could. Interestingly, once she got there she picked up really quickly," Harwood said.
While some whānau were reluctant to go to the hospital when they knew it was overcrowded, many felt a sense of relief or security if their sick children were seen by the specialist, she said.
Middlemore's neonatal unit has regularly been caring for about 10 per cent more babies than its maximum this year and has been given $5 million for its upgrade.
RNZ understands some staff were questioning why the work was taking place in the busy winter season.
The DHB said it was currently paused, waiting for council consents but was due to be finished in August.