The 2-year-old boy, Kyrian Knox, was last seen in August 2015 when his mother, Lanisha Knox, left him in the care of a family friend, Kamel Harris, in Rockford, Illinois.
At the time, the baby's mother was moving from Iowa to Chicago and entrusted Harris with Kyrian, police said.
Harris, 41, was taken into police custody on Monday.
Harris reported the boy missing in September 2015, about two weeks after a dismembered body of a boy was found in Garfield Park Lagoon. Authorities suspect Kyrian had been missing about a month before they were informed.
"He made a false report to the Rockford police that the baby had gone missing," Chicago Police Commander Kevin Duffin said in a news conference Tuesday.
Harris has requested legal council and has not given any statement, police said.
Police executed a search warrant and took Harris' vehicle last November.
"The major break in the case was the fact that he had denied that the baby had ever been inside his vehicle," Duffin said. "Once we took the vehicle with the search warrant, [we] tore out the carpeting and recovered the baby's blood in the vehicle."
CNN has reached out to the Knox family but has not yet heard back.
Kyrian's death was discovered when police found a human foot in the lagoon over the Labor Day weekend in 2015. Searchers then recovered the child's head, two hands and another foot. DNA analysis matched that of Kyrian.
It is unclear how many weeks the body parts may have been in the lagoon, police said.
Police have not been able to determine the cause of death, but according to witness statements, Kyrian kept crying all afternoon because he was lactose intolerant and may have ingested some milk. Harris "kind of snapped and couldn't deal with it anymore," police said.
Chicago police arrested Harris at the Winnebago County Jail, where he was being held on unrelated charges.
"We anticipate he'll be charged later tonight or early tomorrow morning with first-degree murder and concealment of a homicidal death," Duffin said.
Harris will be charged in Cook County, police said.