A total of 1,253 Chinese children have fallen ill after drinking contaminated milk powder, and two babies have died, China's health ministry says.
It confirmed the big jump in the numbers affected at a news conference.
"As many as 10,000 infants may have drunk the contaminated Sanlu milk powder," vice health minister Ma Shaowei warned.
Meanwhile, the New Zealand government has accused the company concerned - and local officials - of failing to act.
The company at the centre of the growing scandal, Sanlu Group, is part-owned by New Zealand's Fonterra Cooperative, the country's biggest dairy producer.
The New Zealand Prime Minister Helen Clark said her government contacted Beijing directly, after alerting the company and officials but to no avail.
Mr Ma said in Beijing that 340 children remained in hospital, and that out of these 53 were in a serious condition.
He confirmed earlier reports in the state media that two babies had died from drinking milk powder produced by Sanlu Group, both of them in north-west China's Gansu province.
Cases of contamination have also been reported in the provinces of Hebei and Jiangsu.
The government is investigating how the contamination occurred. Official media is reporting that melamine, an industrial chemical rich in nitrogen, was added to the milk powder to help the food appear rich in protein, but it also prompted babies to develop kidney stones.
Reports are now emerging of some mothers expressing doubts about the milk as early as March this year, on seeing that their babies' urine was discoloured after drinking the milk.
New Zealand Prime Minister Helen Clark said her government learned of the contamination problem on September 5, then three days later decided to inform Beijing after local Chinese officials refused to act.
New Zealand ambassador to China Tony Brown was deputised to tell the Chinese government.
"We were the whistle-blowers and they [the Chinese government] leapt in and ensured there was action on the ground," Ms Clark said.
Fonterra had "been trying for weeks to get official recall and the local authorities in China would not do it", Ms Clark told TVNZ.
"I think the first inclination was to try and put a towel over it and deal with it without an official recall," she said.
Meanwhile, Sanlu's minority partner, Fonterra, has accused Sanlu of sabotage.
"In this case we frankly have sabotage of a product," Fonterra's chief executive Andrew Ferrier told reporters.
"Our hearts go out to the parents and the infants who were affected," he added.
Under pressure in New Zealand to explain why Fonterra had not gone public with its concerns about the product sooner, Mr Ferrier said his conscience was clear.
He said Fonterra had known of the contamination in early August and wanted an immediate recall but that Sanlu had had to abide by Chinese rules.
"We together with Sanlu have done everything that we possibly could to get the product off the shelf," Ferrier said, speaking to New Zealand reporters by video from Singapore.
1. contaminated 汙染