The little girl was on holiday at the seafront Dalmeny Hotel, in St Annes, Lancashire, with her family.
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According to Sky News, the alarm was raised before midday when the 3-year-old girl’s body was spotted at the bottom of the indoor pool in the hotel spa area.
Staff members jumped into the water and hauled the girl to the poolside where they - alongside two guests - tried to resuscitate her.
She was taken to Royal Manchester Children's Hospital in a critical condition but sadly died later.
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It is understood that the girl's mother was in the pool at the time of the incident.
New reports have claimed that a 40-year-old woman, believed to be the child's mother, was arrested on suspicion of murder and child neglect by Lancashire Police.
Detective Inspector Nick Connaughton, of Blackpool CID, said that investigations were still at an early stage.
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He added: "This is a terribly tragic situation where a young girl has lost her fight for life after an incident in a hotel swimming pool.
"We are now treating this sad case as murder and need to know just how the child has come into difficulties in the pool."
The Dalmeny Hotel, which overlooks St Annes beach, have refused to comment at this stage.