Worried mother Paula Harris had to rush her two-year-old son Thomas to the doctor after he picked up a syringe in the garden of their block of flats.
He is now having to have a course of injections as a precaution against hepatitis B, and is being tested for HIV.
Miss Harris, 29, lives with her partner Keith Bonner, 26, and their other child Casey, in Cornish Road, Chipping Norton.
Miss Harris said: "It's horrendous. Thomas just picked up this syringe on the grass outside and handed it to me.
"I rushed him to the doctor. Although we cannot see any prick marks he is having to have these injections just in case.
"I'm worried sick. If this is going to happen, then I want to move out of here.
"The next day the police came along and raided one of the flats."
Thames Valley Police spokesman David Campbell confirmed that a 31-year-old man had been arrested in Chipping Norton on suspicion of possessing drugs. After questioning he was released on police bail pending further inquiries.
The former West Oxfordshire District Council flats in Cornish Road were transferred earlier this week, with the rest of the council's housing stock, to the control of West Oxfordshire Housing Limited.
Company director David Waters said: "We're aware of the situation and, depending on the outcome of any court proceedings, will be considering what, as landlords, we should be doing."
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