The child, who is now in intensive care, was playing near her family's home in a poor area of New Delhi when she disappeared on Friday, in the latest in a series of horrific sex attacks in India.
Media reports said she had suffered severe internal injuries and had apparently been slashed with a sharp object.
"We have arrested the prime suspect, who is a 25-year-old unemployed youth. He used to visit the area frequently and was known to the victim," a senior police officer told AFP.
Read: Rape victim in India asked to balance heavy rock on head to prove her ‘purity’
"We are verifying if he was involved in any previous cases of sexual assault. We are also questioning some other people," he said on the condition of anonymity.
Police believe more than one person was involved in the attack and are questioning further suspects, although only one arrest has been made so far.
Swati Maliwal, head of the Delhi Commission for Women, said she had visited the girl in hospital and described her injuries as "horrific".
"Her condition can't be described. Horrific. Her parents are extremely poor. When will this heinous crime stop?" she tweeted.
The attack adds to a grim record of sexual assaults in India, many of which have sparked domestic and international outrage.
The fatal gang-rape of a young student on a bus in Delhi in 2012 led to an outpouring of anger over frightening levels of violence against women.
Read: Almost 90% of India's rapes committed by people known to victim
The attack led to a major reform of India's rape laws, speeding up trials and increasing penalties, but sexual violence against women has continued at frightening levels throughout the country.
India recorded 36,735 rape cases in 2014 -- 2,096 of them in Delhi.
Experts say those figures likely under-represent the true scale of the problem.
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