The lack of space is an ongoing problem for staff at the 140-year-old Dublin hospital.
Parents anxious to spend nights with their loved ones must spend eight hours dozing upright in chairs.
And the battle to stop the spread of infection is extra challenging because of the shortage of space in buildings which are getting more crowded.
As the Government confirmed the construction of the new National Children's Hospital at St James's Hospital in the south city, a visit by the Herald to the north inner city children's hospital revealed staff battling to overcome major challenges.
Nurse Karina Ward (29) said the lack of space in her ward was becoming a bigger challenge because of the increasing patient numbers.
"The numbers of children in Ireland with diabetes has grown a lot in recent years. It's quite confined here as we care for growing numbers," she said.
In her ward was seven-year-old Zoe Collins, who has needed regular visits to Temple Street over the past five years.
Her parents, Toyah Gilligan (30) and Wayne Collins (32), have spent whole nights in the ward. A shortage of accommodation for parents means they often have to sleep in chairs beside Zoe's bed.
"It's stressful enough having a child in hospital as it's mentally and physically exhausting, so sleeping in a chair is not good," said Toyah, a mother-of-three from Clongriffin.
Wayne, who has spent more nights than Toyah in a hospital chair, said he wakes up "shattered and stiff" before he has to head off to do a day's work.
Both said the hospital staff were "brilliant" and their kindness made it easier for Zoe to settle in each time.
Nurse manager Marie Corbett said the shortage of space had many negative effects.
"Even breaking bad news to parents can be very difficult, with other people around because of the lack of space," she said.
"Play is also very important for children, but we don't have enough play facilities," she said.
An even bigger difficulty is the shortage of isolation facilities. "When children's immune systems are compromised, there is an increased challenge to avoid the spread of infection and this means having to move more patients around."
"Whenever innovations are being considered, the first question must be 'Do we have the space?'"she said.
Hospital chief executive Mona Baker said the long wait for a new hospital, including the debacle over the scrapped Mater Hospital proposal, has been tough on staff. She acknowledged "the debilitating impact of the waiting game".
To ensure necessary improvements are achieved to continue the high standard of care for the children, funding in the next few years for Temple Street must be made promptly available from the HSE and the Department of Health, she warned.
Admin worker Barry Kennerk said: "We're all very cramped in an old Georgian building providing world-class treatments for the 21st century. But we'll continue to pull together as a team as we've always done."