The scandal surrounding Husi, which is owned by OSI Group of Aurora, Illinois, has alarmed Chinese diners and disrupted operations for fast food chains.
It erupted Sunday when a Shanghai broadcaster, Dragon TV, reported that Husi repackaged old beef and chicken and put new expiration dates on them. It said they were sold to McDonald's, KFC and Pizza Hut restaurants.
Xinhua said the manager of Husi's quality department, Zhang Hui, told investigators "such meat had been produced under tacit approval of the company's senior managers." It said the company "has been conducting the malpractice for years."
An employee who answered the phone at the food agency office in Shanghai declined to give any additional details.
A woman who answered the phone at Husi's Shanghai headquarters said the company would not comment until the investigation was completed. She declined to give her name.
Restaurant operators that have withdrawn products made with meat from Husi include McDonald's Corp., KFC owner Yum Brands Inc., pizza chain Papa John's International Inc., Starbucks Corp., Burger King Corp. and Dicos, a Taiwanese-owned sandwich shop chain.
The scare has also spread to Japan, where McDonald's said 20 percent of the meat for its chicken nuggets was supplied by Husi.
Product safety is unusually sensitive in China following scandals over the past decade in which infants, hospital patients and others have been killed or sickened by phony or adulterated milk powder, drugs and other goods.
Husi said in a statement earlier this week it was "appalled by the report" and believed it to be an "isolated event." It promised to cooperate with the investigation and to share the results with the public.
The State Food and Drug Administration's statement Wednesday said investigators seized 160 tons of raw material and 1,100 tons of finished products from Husi. The agency said earlier its investigation would extend to Husi facilities in Shanghai and five other provinces.
During a conference call Tuesday to discuss its financial results, McDonald's Corp. CEO Don Thompson said the company felt a "bit deceived" about the plant in question.
Foreign fast food brands are seen as more reliable than Chinese competitors, though local brands have made big improvements in quality.
KFC, China's biggest restaurant chain with more than 4,000 outlets and plans to open 700 more this year, was hit hard by a report in December 2013 that some poultry suppliers violated rules on drug use in chickens. Sales plunged and KFC overhauled quality controls, cutting ties with more than 1,000 small poultry suppliers.