Three persons were arrested for allegedly kidnapping Israq Ahmed, who was found unharmed, police said.
The trio was identified as Abdul Ansari (20), who is the key accused, Krishnan Sahu (20) and Suresh Saroj (19), they said, adding a search was on for two more suspects.
Ansari was employed by the boy's father, while Sahu and Saroj were the prime accused's associates.
According to Crime Branch (Unit 11), the boy was playing outside his house in suburban Malwani when at about 8 Ansari seized him and took him to a rented shanty in suburban Goregaon.
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"While the family was frantically searching for the boy, his uncle received a phone call at 11.54 pm from the abductors who demanded a ransom of Rs 50 lakh for safe release of the child," Joint Commissioner of Police (Crime) Sadanand Date told reporters.
"Our sleuths swung into action. Meanwhile, the victim's family continued to receive ransom calls," he said.
Ansari, who was last spotted with the boy, was picked from his residence in Malwani area and during sustained interrogation, he admitted to the crime.
"He led us to the shanty, where the boy had been kept. He was rescued at about 4 pm today and Abdul's two accomplices who were with the child were also arrested," Date added.