A judge ordered the five to be detained for 30 days, the German's lawyer loan Sas told AFP.
The man, who founded a programme for adolescents with problems, is “accused of creating an organized criminal group, human trafficking and sequestration”, he said.
“There is no proof against him,” Sas said, adding the centre continued to operate.
The man's German wife and two others, who were also involved with the programme, have been placed under judicial control and will have to report to police while investigations are on, prosecutors said.
The “Projekt Maramures”, financed by the German state, was licensed by Romania's labour ministry, according to investigators.
A German foreign ministry spokeswoman has said her country had not been aware of any problem in the past 20 years.
But Romanian prosecutors allege children aged 12 to 18 were detained in “slavery-like conditions”, forced to “do exhausting physical labour”.
They were treated in “humiliating and degrading” ways on a farm and in numerous households in the Maramures county village of Viseu de Sus.
The teens were beaten, deprived of food, not allowed to study or take prescription medicines, had no contact with the outside world and were targets of “harsh and brutal methods of so-called re-education”, they said.
A total of 20 children were in the centre when prosecutors searched it on Tuesday, together with seven in other houses, according to the local child protection agency.
Four of the children are now in the care of social services, waiting for their parents or legal guardian.
“The others are still in the centre, which continues to function normally,” Sas told AFP.
Abuse allegations surrounding the programme have surfaced in Romanian media in the past, but no action had been taken until now.