William Allright, three, had been helping his father sweep the backyard of their home in Great Yarmouth when he picked up the syringe.
His father Stephen believes drug users who use a nearby alley dumped it there.
Residents raised Â£1,000 to put up gates but the council removed them saying the alley was a right of way.
The needle incident happened in the back garden of the Embassy Hotel where the family is living.
Residents are now fighting to get the alley closed off officially to stop it happening again.
Mr Allright said: "When you see your child at such a young age with a needle in his hand you wonder where on earth he got it from.
"You find yourself worried to death."
The boy has had a hepatitis B vaccination and is on antibiotics after a visit to hospital.
He now faces six months of further tests until he is cleared of any infection concerns, his father said.
In a statement, Great Yarmouth Borough Council said the situation was under constant review and it encouraged businesses in the area to keep reporting incidents.
A toddler from a Norfolk seaside resort is facing six months of medical tests after a used hypodermic syringe needle became embedded in his finger.