Vincent Mitchell Unsworth is being held by police in the town of Lugoj, 280 miles west of the capital Bucharest, after being arrested last week.
He is accused of luring two 10-year-old boys into his car as they walked home from school, before driving them to a secluded spot where he allegedly assaulted the pair.
The father of one of the boys later alerted the police.
Romanian media quoted a local prosecutor as saying that Unsworth admitted to the acts, but claimed that by offering money to the boys he did not believe he was committing a crime.
Unsworth faces a maximum of seven years in prison if found guilty.
His arrest has re-awakened the country to the threat of foreign paedophiles preying on children.
In 1998 a Church of England priest was sentenced to a two-year jail term for “sexual perversion of a minor.”
Such cases reveal the disturbing development of so-called sex tourism in the desperately poor country.
Save the Children estimates 2,000 abandoned street children roam the country, surviving only by selling themselves to mostly foreign travellers from western Europe.
Romania’s painful economic transition has left the ex-communist country with little means to care for the many children born under former dictator, Nicolae Ceausescu, who banned abortion and contraception.
A spokesman for Scotland Yard’s National Criminal Intelligence Service (NCIS) says known British sex offenders are subject to restrictions on movement, but admitted it did not prevent convicted paedophiles from leaving the UK.
British courts are now able punish individuals accused of perpetrating crimes on foreign soil, including sex tourism, the spokesman said.
