The girl was reported missing from Mt Wilson since Friday, January 14.
A search has been carried out for the past five days.
Police this morning said a search in the vicinity of Colo River, about an hour from the Blue Mountains, had located human remains.
The body of a child was found in a barrel. The remains are yet to be formally identified.
At about 8.30pm last night, detectives arrested 32-year-old Justin Stein at a unit in Riley St, Surry Hills, in inner Sydney.
He was charged with murder and refused bail to appear in court today.
Police are expected to provide more information at a press conference later today.