Yoselyn Ortega entered the plea in hospital, where she is being treated for stab wounds. Police say she stabbed herself after killing the children.
Ms Ortega, 50, has been charged with murdering Lucia Krim, six, and her two-year-old brother, Leo, on 25 October.
Their mother, Marina Krim, returned home to find the children dead in a bath and Ms Ortega bleeding heavily.
The children's father, Kevin Krim, a CNBC television executive, was away on a business trip.
On Wednesday a judge ordered Ms Ortega held without bail pending a psychiatric examination.
Ms Ortega was handcuffed to a bed at New York-Presbyterian/Weill Cornell Medical Center in New York's Manhattan borough during the proceedings.
She wore a blue hairnet, had a tube in her throat, and lay under a white blanket, appearing alert, the Associated Press reported.
No flowers, photographs or other personal items were displayed in the hospital room.
Ms Ortega was charged with four counts of murder.
She entered her pleas through her lawyer, Valerie Van Leer-Greenberg, who said: "I ask you to enter a not guilty plea on behalf of my client."
Ms Leer-Greenberg told a judge her client was "profoundly, medically impaired and in need of medical attention".
Mrs Krim had chronicled her children's upbringing in a blog, Life with the Little Krim Kids, which has since been taken offline
Fall Gal! Without a doubt in my mind. I read some of her blog before taken down and she adored them. She is a victim, not a perpetrator.
This story never did make any sense to me. How could a loving nanny turn into a psychotic murderer overnight? From what it sounds like, she never had any psychotic breaks before. What would be the motive?
I agree Freedom. There's "much more than meets the eyes" with this story.
Is it possible the mother actually killed the two children and the Nany was so upset she decided out of grief and ... to stab herself to death so the mother would never be charged for it. The police would never think of that.
No, they were murdered by professionals. How quick people seem to forget the plot of the story. The Managing Executive Editor of CNBC allows the story of a Federal Lawsuit exposing the massive wide spread RICO corruption, fraud, and manipulation of the world's Money and Precious Metals markets, (i.e. Banksters), and this episode takes place the night after the story ran. The story was literally killed immediately at CNBC, along with two beautiful children.