The police chief of the adjacent town of Pinckard, James Arrington, says Dykes and the boy are in a bunker that's about 4 feet underground and has about 6-by-8 feet of floor space, CBS affiliate WKRG reported.
He says the man identified by neighbors as Dykes has been sleeping some.
The chief also says the man holds strong anti-government views and the FBI has reason to believe the shooting of the driver was a hate crime, WKRG reported.
The talks continued, police said, through a ventilation pipe.
Multiple neighbors identified the suspect as Jimmy Lee Dykes, a 65-year-old retired truck driver who had moved to the neighborhood on a rutted red clay road more than a year ago. It didn't take long before he developed a frightening reputation as a volatile man with anti-government views who threatened his neighbors at gunpoint and was vicious to wandering pets.
The boy was watching TV in the bunker and getting medication sent from home, according to state Rep. Steve Clouse, who met with authorities and visited the boy's family. Clouse said the bunker had food and electricity. Authorities lowered medicine into the bunker for the boy after his captor agreed to it, Clouse said.
"He will have to give up sooner or later because (authorities) are not leaving," said Arrington. "It's pretty small, but he's been known to stay in there eight days."
"He's against the government - starting with Obama on down," Arrington said. "He doesn't like law enforcement or the government telling him what to do. He's just a loner."
Dozens of cars for police and FBI agents blocked the entrance to the dirt road to the property. At least one ambulance was parked nearby. Homes on the road had been evacuated after authorities found what they believed to be a bomb on the property.
Police negotiators tried to win the boy's safe release.
"As far as we know there is no relation at all. He just wanted a child for a hostage situation," said Michael Senn, a pastor who helped comfort traumatized children after the attack.
The slain bus driver, Charles Albert Poland Jr., 66, was hailed by locals as a hero who gave his life Wednesday to protect the 21 students aboard the bus. Authorities say most of the students scrambled to the back of the bus when the gunman boarded and said he wanted two boys 6 to 8 years old.
When the gunman went down the aisle, authorities said, Poland tried to block him. That's when authorities say the driver was shot four times before the gunman grabbed the child at random and fled.