By JENNIFER 8. LEE

ASHINGTON, Feb. 7 — Scientists at the Consumer Products Safety Commission said today that children playing on millions of outdoor wood playground sets nationwide face an increased risk of bladder and lung cancer from arsenic exposure.

The report recommends that children wash their hands after playing on wooden playground sets and also not eat in the vicinity of the wood.

The report is the first acknowledgment by the federal government that there are health risks associated with pesticide-treated wood that has been in wide use in residential settings such as playgrounds and decks since the 1970's. Since the 1930's, residential wood has commonly been treated with a pesticide, known as chromated copper arsenate, or C.C.A., to prevent rotting. This pesticide contains arsenic, a known carcinogen, which bleeds from the wood. Young children can ingest the arsenic when they put their hands to their mouths or when they touch food or toys which are then placed in their mouths.

The study projects that between 2 to 100 children out of one million will get bladder and lung cancer from their exposure to the arsenic. Generally, the threshold of disease for government concern over toxins is one in one million individuals being affected. The study notes that cancer can take decades to develop, so it based its conclusions on previous scientific studies of arsenic exposure.

"It's important the government has said this because people need to know their arsenic-treated playsets are hazardous for their children," said Richard Wiles, a spokesman for the Environmental Working Group, an organization which has petitioned to ban the pesticide in the wood.

There have been environmental concerns about the pesticide since the mid-1980's. At that time, the government considered banning the pesticide-treated wood, but decided to allow industry to launch a consumer education program on its risks.

Last year, the Environmental Protection Agency and companies reached an agreement to phase out the pesticide-treated wood products by the end of 2003. But the E.P.A. said it saw no need for consumers to remove existing structures that used the wood. The agency is conducting its own study on the risks associated with the wood.

The commission's report was an internal study in response to a petition on banning wooden playground sets by environmental groups in 2001. The study will be among factors that will be considered by the three commissioners at a March 12 hearing.

The Consumer Products Safety Commission and the E.P.A. are jointly studying various sealants to help mitigate the risks of arsenic exposure.

Hal Stratton, the chairman of the safety commission, said that it would weigh the different perspectives from industry and environmental groups before making a decision on what to do about the playground sets. This could range from recommending regular application of sealant to removal of the existing playground sets.

Wooden decks generally are also treated with the pesticide. But, commission scientists concentrated their warning on playground sets since they are used by children.

Playground sets that are sold in 2004 will not be at risk, because of the agreed upon gradual phase-out of the pesticide wood. Some playground companies are already using wood treated with arsenic-free preservatives. In addition, some woods, such as redwood and cedar, are naturally rot-resistant and are not treated with the pesticide. Playground sets made of metal and plastic do not have any arsenic-based risks.

But it is difficult to recognize wood treated with the arsenic-based pesticide. The study recommends calling the manufacturers to check. But because pesticide-treated wood was so popular, the study recommends that consumers should assume the wood is pesticide-treated unless they know otherwise.

The commission recommends that consumers not burn the pesticide-treated wood in open fires or in the furnace, as that releases arsenic into air, water and soil. Instead, people should contact their local E.P.A. office or local government to find out how to appropriately dispose of the wood.