A.J. Demaree said he could understand why the police were there, but he said the pictures were innocuous snapshots of his kids goofing around, and some of them involved the children being naked.
"We have told our girls that they have freedom to be in their home and feel OK about their bodies and their nudity, but that there is a time and a place for it," Lisa said.
Police seized numerous videotapes and the Demarees' computers and said they found more photos and videos of the children frolicking without clothes.
Investigators and Child Protective Services saw it very differently and removed the children from the house.
A medical exam of the children revealed no signs of sexual abuse, and a judge ruled that the photos were in fact harmless.
ABC News legal expert Dana Cole said that in cases of child pornography authorities need to prove sexual intent on the part of the parents, and that after the judge reviewed the case and the Demarees underwent psychological evaluation, it was determined that there was no such intent.
From the Demarees perspective, the damage was already done.
Police and prosecutors insist they did what they thought was appropriate.
"It took us a long time to take a picture [again]," Lisa Demaree said. "I even worry about them in their bathing suits now, if I get a shot of them in their bathing suits and they're tilting their heads a certain way or their hips are sticking out a little bit, all I think of is 'Does someone think that it was posed? Or how is that going to be perceived?'"
Steve Meissner, a spokesman for Child Protective Services, released a statement saying, "When a police agency calls us on a matter, we have an obligation to act on that matter. If we refused, the community would be very unhappy with us."
The city of Peoria also states that it stands behind the appropriate actions of their officers.
"Honestly we've missed a year of our children's lives as far as our memories go," Lisa Demaree said, "As crazy as it may seem, what you may think are the most beautiful innocent pictures of your children may be seen as something completely different and completely perverted."
ABC News' Lee Ferran contributed to this report.