The Wayne, N.J.-based company said it would award each of the three babies in the grand prize pool of the "First Baby of the Year Sweepstakes" a $25,000 savings bond. Toys 'R' Us is the parent company of Babies 'R' Us, which sponsored the contest.
Toys 'R' Us, which opened its first mainland China store less than a month ago, changed its mind after Chinese-American advocates protested and the story was reported in ethnic newspapers and The New York Times, among other outlets.
"We love all babies," the company said in a written statement Saturday. "Our sweepstakes was intended to welcome the first baby of 2007 and prepare for its future. We deeply regret that this sweepstakes became a point of controversy."
The prize was originally supposed to go to Yuki Lin, who was born at the stroke of midnight at New York Downtown Hospital, according to hospital officials.
She won a random drawing with two other babies for the $25,000 savings bond, said Toys 'R' Us spokeswoman Kathleen Waugh. The company had said it would go to the first American baby born in 2007.
Yuki was born an American citizen. But the company disqualified her because "the sweepstakes administrator was informed that the mother of the baby born at New York Downtown Hospital was not a legal resident of the United States," Waugh said.
Although promotional materials called for "all expectant New Year's mothers" to apply, Waugh said eligibility rules required babies' mothers to be legal residents. Many sweepstakes have such requirements, Waugh said.
Attempts to reach Yuki's parents, Yan Zhu Liu and Han Lin, 22, were unsuccessful Saturday. Their immigration status was not clear.
The original prize was instead awarded to runner-up Jayden Swain, born 19 seconds after midnight at Northeast Georgia Medical Center in Gainesville, Ga. The third baby in the running was born in Bay Shore, N.Y., to a couple from El Salvador.
Chinese-American advocates had complained that the toy company's decision smacks of second-class citizenship. They said the prize was supposed to be for the child, not the mother. One attorney launched an e-mail campaign on the issue.
"People are just pretty much outraged," John Wang, president of the New York-based Asian American Business Development Center, told the Times for Saturday's editions.
But the original winner's grandmother, Janet K. Keller, said revisiting the contest would be unfair. "She was disqualified — that should be it," she told the Times. "Don't go changing your mind now."