The Mexican police have rescued more than 450 children, who were believed to be abused at a children's home in Zamora in the state of Michoacan.
The police also rescued 138 adults aged up to 40, the government officials said.
They were allegedly subject to sexual abuse and forced to beg on the streets.
The owner of the home, Rosa del Carmen Verduzco, along with eight employees have also been arrested.
According to the government officials, the building was home to 278 boys, 174 girls and six infants under the age of three.
Reports say the residents were forced to live in terrible conditions.
"I am in utter dismay because we were not expecting the conditions we found at the group home," local governor Salvador Jara said.
The House of the Big Family has been operating for 40 years and was known locally as Mama Rosa's Home.
Local journalists say the home and its founder had been well-known and respected in the state.
The authorities began to investigate the home after parents complained that they were denied access to their children.
One woman, who grew up at the home herself, gave birth to two children, who were registered in the name of Mrs Verduzco. When the mother left the home, aged 31, she was not allowed to take her children with her, investigators said.