The shocking incident took place yesterday in the Shahpur Jat area. The girl was admitted to Safdarjung Hospital and is out of danger now, they said.
The victim's parents told police that the accused lived in the neighbourhood and worked in the housekeeping department of a hotel.
He was a friend of the toddler's father, who would often ask him to be with the girl while he was away at work. His wife works as a domestic help and was out for work.
The accused was alone with the girl when he allegedly sexually assaulted her. Later, when the girl's mother came back, she found her daughter was crying and there was bleeding from her private parts, the police said.
She was taken to a hospital, where doctors informed the girl's parents that she was sexually assaulted.
As the police were informed, it was found the toddler was allegedly raped by her father's friend who was babysitting her. He was arrested from his house, the police said.
Police is probing if the accused had sexually assaulted the girl on earlier occasions as well. They are also probing if he had any accomplice.
People in the locality would often leave their children in the care of the accused and it is being probed if he sexually assaulted any other child.
Delhi Commission For Women Chairperson Swati Maliwal visited the girl in the hospital. She also protested in front of Home Minister Rajnath Singh's residence demanding the home minister visit the victim to understand the pain she went through.
She has also been demanding the perpetrators in cases of rapes of minors be awarded death sentence within six months to send out a strong message.
Ms Maliwal was detained along with other members of the women's panel and taken to Mandir Marg police station and later released.
Earlier this month, a one-and-a-half-year-old girl was raped by a man in the presence of his two children in outer Delhi's Aman Vihar. The accused was subsequently arrested.