The worker was allegedly trying to dump the corpses as he could not afford burial fees. A hospital spokesperson said it was co-operating with police investigations into the incident.
A BBC correspondent in Lagos says many families are too devastated to deal with the dead babies and others cannot afford morgue fees, so abandon them outside hospitals. Hospitals hire contractors to bury the corpses.
A police preliminary investigation also led to the arrest of some workers in the Department of Morbid and Anatomy at the teaching hospital, said Lagos state police public relations officer Frank Mba.
He also said that the suspect had not intended to use the bodies in any rituals. "We are sure that the suspect is neither a ritualist nor a murderer nor a trafficker. Other contending issues like corruption and abuse of office will be investigated," Mr Mba added.
The hospital described the incident as an embarrassment to the organisation. The BBC's Fidelis Mbah says there's been a state of shock and disbelief among people in Lagos who cannot believe that a hospital with the magnitude of Lagos University Teaching Hospital would allow a contactor to handle that many corpses without supervision from its staff.