In a statement made from the US, the toy giant announced that instant action was being taken after three children were hospitalized with serious injuries when swallowing tiny magnets that fell off the toys.
Overall, the Consumer Product Safety Commission has received 170 reports of the small magnets falling out of the Polly Pocket dolls and accessories.
Revisions will be made to the product, but in the meantime Mattel must suffer the cost and PR nightmare of such a massive recall.
According to reports, the tiny magnets can fall out and be swallowed or inhaled by children. If more than one magnet is swallowed, they can attach to each other and cause intestinal perforation, infection or blackage - which can be fatal.
The recall applies to 2.4m Polly Pocket sets sold in the US before September 2006 and another two million sold worldwide - including the UK.
It is important to note, however, that the recall does not include sets currently on store shelves.
Consumers should contact Mattel to arrange for the return of the sets and to receive a voucher for a replacement toy of the customer's choice, up to the value of the returned product, the Commission said.
Mattel shares declined 7 cents to $23.25 during late morning trading in the US.