The search for Jefferson Lewis, 47, had intensified following the discovery of a child's body about 5km from where a five-year-old disappeared near Alice Springs at the weekend.
Police said it was believed to be that of the missing girl, referred to as Kumanjayi Little Baby at her family's request.
"A short time ago, the Northern Territory Police Force located and arrested Jefferson Lewis at a residence in Alice Springs," authorities said on Thursday evening.
"Further information will be provided early in the morning."
Crowds clashed with police officers overnight outside Alice Springs Hospital, where Mr Lewis was reportedly taken.
A police vehicle was set alight outside the hospital.
Earlier on Thursday, police addressed the girl's accused abductor and killer.
"We're coming for you," Northern Territory Police Assistant Commissioner Peter Malley said.
The girl went missing after being put to bed at a residence in the Old Timers camp near Alice Springs on Saturday night.
Mr Lewis is accused of abducting her just six days after being released from prison.
It sparked one of the NT's largest investigations with almost 200 people scouring harsh desert country for the non-verbal girl and Mr Lewis.
The child's body was found about noon on Thursday, on day five of the search.
A pair of children's underwear found during the investigation had been linked by forensic analysis to both Mr Lewis and the girl, police said.
Police are adamant Mr Lewis had been helped by people in the community and remained in the Alice Springs area.
"To the family of Jefferson Lewis: we believe he has murdered this child - do not assist him," Mr Malley said.
"Get him to the police station and we'll look after him."
Mr Lewis was sentenced to 64 months in prison, between 2016 and 2025, for offences including aggravated assaults, breaching domestic violence orders, bail and resisting police.
NT Chief Minister Lia Finocchiaro did not rule out a reward or policy response as police hunted Lewis, after leading condolences for the girl's heartbroken family.
"Everything is on the table. We will be led by the police investigation," she said.
"A poor young lady has passed away, and the police are now doing the work to stop this happening again, to make sure that the person who did this is caught."
A post-mortem examination, expected to be conducted within days, will be crucial in determining the cause and timing of the girl's death, police said.
A coronial process kicked off as the girl's family reeled from the tragedy.
Kumanjayi Little Baby's devastated family paid tribute to their beloved girl, thanking everyone who took part in the search.
"I know you are in heaven with the rest of the family," her mother said in a statement.
"Me and your brother will meet you one day. We are giving our lives to Jesus.
"It's going to be so hard to live the rest of our lives without you."
1800 RESPECT (1800 737 732)
National Sexual Abuse and Redress Support Service 1800 211 028
13YARN 13 92 76
Lifeline 13 11 14
15°C