Lakhimpur Police arrested the 22-year-old man on Wednesday night, four days after the gruesome incident.
The accused, identified as Arjun Dutta, a resident of Simaluguri, Dhalpur area of the district, was picked up by police from Simaluguri on suspicion of being involved in the incident.
Police officials said Arjun confessed to his crime of first raping the school girl and then murdering her to hide his misdeed.
The body of the seven-year-old girl was found on Sunday morning inside the compound of a forest beat office in Arunachal Pradesh.
The girl went missing on Saturday while returning from school at Rajgarh Dajan under Simaluguri Police Outpost.
Her parents filed an FIR at the Simaluguri Police Outpost in the evening but the police failed to trace her. Police have suspected that the girl was first raped then murdered.