The skin maybe peeling off because of excessive dryness. Try giving him/her more water and to put some cream on them. If it doesn't work call your pediatrician.
He/She may either have dry skin or his/her skin may be reacting to soap you are using. For the dry skin, I suggest using a gentle lotion and changing soap.
Your toddler may just have excessively dry skin and may require a lotion especially designed for babies and young children. If your child's skin is red, cracking, or bleeding, you should see your child's doctor.
Children with peeling skin in these area's are often suffering from hand foot and mouth disease. Take your child to a Doctor to rule this out. Peeling skin can also be a sympton of eczema which can be be relieved with over the counter creams. It could also come from water exposure due to swimming or playing outside.
