Cleo Smith was found by police in a private home around 30 miles from the campsite and has been reunited with her parents, Western Australia police said in a statement.
A local man is in custody and currently being questioned by detectives, it added.
In a video post on the police force's public Facebook page, deputy commissioner Col Blanch said, "It's my privilege to announce that in the early hours of this morning, the Western Australia Police Force rescued Cleo Smith. Cleo is alive and well."
Blanch said a police team broke their way into a locked house in Carnarvon about 1 a.m. local time (1 p.m. ET) and found a child who identified herself as Cleo.
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One of the officers who found her picked the child up and asked her name, Blanch said. She replied, "My name is Cleo," he said.
"This is the outcome we all hoped and prayed for," he added.
Cleo Smith's mother posted to Instagram: "Our family is whole again"
Child vanished from campsite
Cleo vanished from her family's tent at Blowholes campsite in Macleod, about 30 miles north of the town of Carnarvon in the early hours of Saturday, Oct. 16.
It was the family's first trip to the tourist site since the birth of Cleo's younger sister, and their first night in the tent after arriving about 6 p.m. on Friday night, according to police.
Cleo's mother, Ellie Smith told reporters early in the search that Cleo woke at 1:30 a.m. and asked her for a drink of water before going back to sleep. When Smith woke again at 6 a.m., Cleo was gone.
The girl's disappearance triggered a massive police search of several square kilometers around the site with helicopters, drones and officers flown in from the state capital Perth.
Cleo's sleeping bag was also missing and the zip on the tent was at such a height that police surmised that she had been abducted.
Smith and her partner Jake Gliddon made public appeals for help to find their child. Less than one week into the search, the Western Australia government also offered a reward of 1 million dollars ($750,000) for information leading to her.
Few clues emerged in the weeks leading up to Cleo's discovery.
Police had issued calls for the driver of a vehicle seen heading south on the main road from campsite to Carnarvon to come forward. As of Tuesday, police hadn't revealed if they had found the vehicle.
Earlier this week, police sorted through hundreds of bags of rubbish collected from roadside bins north and south of the campsite where Cleo went missing. Officers also started visiting homes in the Carnarvon area, looking for any sign of the girl.
After Cleo's discovery on Wednesday, Xanthe Mallett, a criminologist from the University of Newcastle in New South Wales said the chances of finding a missing child after a suspected abduction by a stranger were "very low."
"When a child goes missing, especially after this length of time, everyone was thinking the worst, and it's just such an amazing outcome," she said.
Mallett said Western Australia Police appeared to be closing in on Cleo earlier this week by releasing only small and apparently strategic amounts of information to the public.
"They were using public support and the pressure that they were leveraging through the media, to put pressure on people or maybe around the offender who may have known something," she said.
It's unclear if anyone has claimed the reward offered by police for information.
Australian Prime Minister Scott Morrison described the news as "wonderful" on his official Twitter account. "What wonderful, relieving news. Cleo Smith has been found and is home safe and sound. Our prayers answered. Thank you to the many police officers involved in finding Cleo and supporting her family."
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