Sanlu Group, the dairy firm first found to be selling melamine-contaminated goods, began receiving complaints of sick children last December, Xinhua news agency reported, citing a cabinet probe.
It also said Communist officials in the north Chinese city of Shijiazhuang, where Sanlu is based, delayed referring the matter to higher authorities for more than a month after they finally were told of it in early August.
"They violated rules on reporting major incidents involving food safety," Xinhua said, quoting the cabinet probe.
The Xinhua report appeared to be the first official admission that delays in reporting the risks were deliberate.
Reports of tainted milk only emerged in state-run media earlier this month. The chemical melamine, normally used in making plastics, was apparently added to milk supplies to give the appearance of higher protein levels.
Sanlu Group did not begin testing its milk until June and failed to report the matter to local authorities until August 2, the Xinhua report said.
The government has blamed tainted products for four deaths, and said late Sunday that 12,892 children remained hospitalised with kidney problems, 104 of them in serious condition.
Meanwhile the repercussions outside mainland China continued to mount with Hong Kong authorities reporting a second child ill with a kidney stone after drinking contaminated Chinese dairy products.
The four-year-old boy was in a stable condition, the Hong Kong Centre for Health Protection said in a statement.
A three-year-old girl in Hong Kong who fell ill last week was the first such case outside mainland China. She is also said to be in good condition.
Meanwhile, the Philippines became the latest country to order an immediate ban on the import and sale of Chinese dairy products.
"What we are telling parents now, especially the mothers, is to avoid buying milk with 'made in China' markings," said Leticia Gutierrez, the head of the country's Bureau of Food and Drugs.
Bangladesh, Brunei, Burundi, Japan, Gabon, Malaysia, Myanmar, Singapore, Taiwan, Tanzania and Vietnam all have either barred Chinese milk products or taken some other form of action to curb consumption.
The scandal claimed its biggest political scalp so far on Monday with the resignation of China's product-safety watchdog chief, Li Changjiang.
Li had overseen the ministry-level agency in charge of product quality amid a wave of scandals that have tarnished China's manufacturing reputation.
Also sacked was Wu Xianguo, the top Communist official of Shijiazhuang. The city's mayor and several other government officials had been fired earlier.
Eighteen people have been arrested so far in the case, including the sacked head of Sanlu Group, and dozens have been detained for questioning, according to state media.
China has been hit by a wave of embarrassing scandals in recent years over dangerous products including food, drugs and toys, spoiling its manufacturing reputation.
The China Daily quoted a food safety expert warning of further disasters.
"If the safety supervision mechanism is not reformed, it's likely that such a scandal would break out again," warned Chen Junshi, a senior researcher with China's National Institute for Nutrition and Food Safety.