From Muppet Wiki

The Nursery is the home of the Muppet Babies. It debuted in The Muppets Take Manhattan, during Miss Piggy's dream sequence, as an idealized world where the Muppets all knew each other as infants and where little ones could abuse their Big Bird doll while playing doctor. Notable features of the well-lit nursery included Baby Rowlf's baby grand piano, a rocking horse, cribs, swing sets, and an assortment of play vehicles.

The nursery subsequently became the primary location during the Muppet Babies series, under the watchful eye of Nanny.