An 11-year-old British girl was allegedly pimped out as a prostitute by her ex-pat parents for £12 a time.
Police arrested the couple on the holiday island of Majorca amid claims they sold the girl, now 15, to a 76-year-old man in exchange for money over a five-year period.
It is understood the mother took her daughter to meet the man on each occasion, with amounts changing hands varying between £12 and £16, according to The Sun.
The child was apparently ordered to leave her care home by the pair, and she was then handed to the pensioner and subjected to sexual assaults after being locked in a room.
Spanish newspaper Ultima Hora alleged the victim was raped.
Reports say the girl's parents are suspected of corrupting a minor, sexual assault, and inciting their daughter to escape from care.
The 76-year-old, who is said to suffer from health problems linked to his age, is suspected of sexual assault, and the three suspects all appeared in front of a magistrate who freed them on bail as the investigation continues.
Authorities in Palma Nova, Majorca, a resort popular with tourists, are looking after the pair's children. The pensioner is said to suffer health problems linked with his age.
A spokeswoman for the Foreign Office last night said: 'We can confirm the arrest and subsequent release of two British nationals in Majorca.'
Spanish police could not be contacted for comment.