The woman, identified as Manjula, was arrested last night, Deputy Commissioner of Police (central zone) Joel Davis said, adding the baby later died of ill health.
The accused, a native of Warangal district, had come to the Niloufer Hospital on Saturday with the hope of getting a child from some parents, he said.
On Sunday, the child's grandmother had brought him to the hospital for treatment. Manjula tricked the elderly woman by helping her with the formalities of the treatment, and allegedly stole the baby. She then fled to Telangana's Nagarkurnool district, police told reporters late last night.
A case of kidnapping was registered and 15 teams were formed to trace the woman, they said.
After an analysis of over 100 CCTV cameras in different areas of the city, the police found that the accused went to Petlaburz area, met her husband there and all of them went to his native village in Nagarkurnool, Mr Davis said.
"She had concealed from her husband and in-laws about her second miscarriage and posed to them as if she was pregnant and had come to Hyderabad for a check-up," the DCP said. A woman from the native village of the accused's husband informed the police that she had seen Manjula coming there with a newborn boy, he said.
According to the informant, the baby died of ill health on Sunday. The offender's family members buried the baby at an agricultural field the next day and left the village, the police officer said.
The police managed to track the accused's location and arrested her around 10 pm yesterday from Hyderabad, the DCP said. "We are examining whether there was an involvement of her husband in the matter, though the accused asserted that her husband was not aware about the kidnapping, and that he still believes the boy was their child," he added.