Hi D.,
Most likely this is normal behavior, but I would gently take the toy away when he does it, and distract him to something else - especially if he does it outside his own bed/bedroom. Without saying much, if anything, beyond, "Come on honey, let's go play..." or "Come help Mommy..." Some kids are quite sexual once they discover the sensations; some are lonely; and some unfortunately have been abused.
So, as a caution only, if this is a brand new behavior, different from anything else he's ever done, think about who he's been with lately - anybody new? Anybody he suddnely doesn't like? New nursery school or daycare?
If this behavior continues, you could also check in with his pediatrician, who has known him, for suggestions.
M.