The accused, identified as Amar Singh (20) and Lallu Singh (20), had kidnapped the minor on Sunday evening to demand ransom from his parents, the official said.
Amar Singh was known to the victim and his family, police said.
The boy's father had registered a complaint at Powai police station after his son did not return home till late night on Sunday.
"After kidnapping the child, Amar took him to Navghar area of Bhayandar and kept the boy at the house of his accomplice Lalu. The duo, however, got scared when the victim's father called one of them and enquired about the whereabouts of his son," an officer said.
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According to police, the boy was last seen playing with Amar Singh before he went missing.
"When Amar returned home on Monday, we interrogated him. He confessed to have committed the crime along with Lalu. After that, they were arrested and the boy's body was recovered from Bhayandar (east)," police said.
The duo has been booked on the charges of kidnapping and murder, the official said.
The accused were produced in a local court, which sent them to seven days police custody.
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