The five-hour siege ended without bloodshed as 32-year-old Cristian Familiari, who had been armed with a box-cutting knife, released his remaining hostages and was subsequently detained by police.
There were initially eleven people in the building, but Familiari had earlier released some of them.
Cristian Familiari entered the nursery school in Italy's southernmost city of Reggio-Calabria at around 11:00 a.m. (10:00 a.m. GMT). He then demanded a ransom of 500,000 euros ($726,000) for the release of the children and their teachers.
Italy's ANSA news agency reported that he had financial difficulties after two of his businesses were closed. The agency earlier said that Familiari was the father of one of the children and that he had complained that he had not seen his son for a long time following a divorce from his wife.