The call went out at 10:00 a.m. Tuesday from administrators at the Thomas Mifflin School in the 3600 block of Conrad Street in East Falls.
Authorities tell Action News a 4-year-old boy came to school with $173 in cash and started showing it off to a classmate.
The classmate thought something was wrong and told a classroom attendant.
The attendant approached the boy, and police say he handed her a small amount of what appeared to be drugs from of his pocket.
Investigators later determined the boy was carrying 8 zip-lock bags - so-called 'dime bags' - containing an off-white chunky substance which turned out to be crack cocaine.
The boy didn't say where it came from or why he had it.
Police were called and a canine unit arrived to search the building. Investigators say no other suspicious substances were found.
The boy was taken to an area hospital for observation. Authorities wanted to make sure he hadn't ingested any of the substance.
As of noon Tuesday, investigators were still trying to contact the boy's parents. Police say charges may be pending against them, but not the boy.
Meantime, police commended the boy's classmate for alerting his teacher.
"He saw that big amount of money, and he knew something was wrong," said Philadelphia Police Chief Inspector Cynthia Dorsey.
"I'm going to make sure we do some education, some awareness, maybe bring D.A.R.E. to the school to make sure that kids know this is bad, and if they see it, that they should not touch it," Dorsey said, referring to illegal drugs. "They should get an adult, tell an adult. That's what that other student did."