The days-old baby had been left in a chute several metres deep in the centre of town, the woman who claims to have found him told local media.
"The baby was placed in a paper bag... it was dropped there to die," Vassiliki Tsoni told the Newsit website.
"The chute was half full. I was shouting, nobody was stopping to help," said Tsoni, adding that she had stayed to dissuade neighbours from dropping more rubbish down the chute.
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"If I had left to call the police, more garbage would have covered the baby. I was there for half an hour. It was crying, I was crying... I'm no mother but it really hurts."
"The baby was fortunate in its misfortune... there was a delay in the day's collection," Kalamata mayor Thanassis Vassilopoulos told Alpha TV.
"The garbage trucks do not just load waste, they compress it."
The baby was taken to a local hospital with breathing difficulty, and is expected to make a full recovery, the station said.
Police later said they had arrested a young woman in relation to the incident.
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