The dog sniffed its way to a mound of sand at the site and stood there, implying that it had picked up a scent from the clothes that the child was wearing, a police officer said.
Ram Niwas, the guard who went missing, was arrested on Friday near Shamshan Ghat, Mandoli, the officer said.
The boy, the son of a tea stall owner, had gone missing on August 11 while returning home from his father's shop. His body was found at a nursery near the construction site on August 12, a few hours after a police case was filed.
Police said Ram Niwas in 2009 also allegedly kidnapped and killed a six-year-old.