On March 29, two men barged into a house at Boisar area in Palghar district and took away the two children when they were sleeping with their parents, Inspector Boisar police station, K S Hegaje said.
The two accused later allegedly raped the girl. They also inflicted injuries on the boy's ear and his private parts, he said, adding that the accused then fled from there.
Later, the parents, employed as labourers, found the wailing children at some distance from their house.
Interrogation of the arrested person was on, police said adding, they have launched a manhunt to nab the other accused.
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The accused, who are drug addicts, used to make baskets and sell them near the house of the victims.
Offences under sections 307 (attempt to murder), 376 (2)(i) (rape) and 326 (voluntarily causing grievous hurt by dangerous weapons or means) of the IPC and sections 3 and 4 of POCSO Act were registered against the accused, the inspector said.