Shanghai television, which reported the original allegations, said that workers at the OSI China plant mixed expired meat with the fresh product and deliberately misled quality inspectors from McDonald’s.
Other customers included Burger King, Papa John’s Pizza, coffee chain Starbucks and sandwich maker Subway.
City officials closed the factory on Sunday and seized products which allegedly used expired meat, the Shanghai food and drug administration said in a statement.
Police were investigating, it said, threatening “severe punishment” in future.
McDonald’s said in a statement it had “immediately” stopped using the factory’s products while KFC and Pizza Hut restaurants also halted use of its meat.
China has been rocked by a series of food and product safety problems, due to lax enforcement of regulations and corner-cutting by producers.
One of the worst occurred in 2008 when the industrial chemical melamine was found to have been illegally added to dairy products, killing at least six babies and making 300,000 people ill.
Retail giant Walmart of the US said early this year that it would tighten inspections of its suppliers in China after it was forced to recall donkey meat products that had been found to contain fox.
Last year, China detained hundreds of people for food safety crimes, including selling rat and fox meat disguised as beef and mutton, after a three month crackdown.