Indiana State Police spokesman Curt Durnil said in a statement that the body, which matches that of Shaylyn Ammerman, was found near the White River northeast of Gosport. Shaylyn's mother, Jessica Stewart, confirmed the information to WTTV.
"Information from witnesses and persons of interest led us to that spot," Durnil said later during a news conference. He said the body was found on private property.
The Owen County coroner's office will perform an autopsy Friday to positively establish an identity and cause of death.
WTTV said 22-year-old Kyle Parker of Spencer was being held in connection with the girl's disappearance.
Shaylyn's father and grandmother, Justin Ammerman and Tamera Morgan, were the last people known to have seen the child around midnight Tuesday. She'd been staying at the father's home about 50 miles southwest of Indianapolis under a joint custody arrangement with the girl's mother.
"I put her to bed around 10:00 or 10:30 and I checked on her at midnight before I went to bed," Morgan said. "She was laying in her bed sound asleep and then we went to bed and we woke up and she was gone."
Ammerman said he was "just shocked that somebody would do this to me," and believes someone took his daughter from her crib in the middle of the night.
"Somebody's got a big grudge over us," he said.
More than 100 people took part in the search for Shaylyn, including a search-and-rescue team, FBI agents, Indiana Department of Natural Resources staff and the National Center for Missing and Exploited Children.
Stewart told WTTV Ammerman was having a party Tuesday evening. Ammerman denied that, claiming someone entered through the front door of the house and kidnapped Shaylyn.
Investigators said the man who is in custody was in the house the night of the girl's disappearance but they don't know what his exact role was, Durnil said.
"We don't know if he is a family member or a friend," Durnil said. "But he was invited into the house."
Durnil said there are other persons of interest in the case.
"The investigation is not close to being over," he said.