Brigadier el-Shafei Mohammed Hassan, chief investigator in the southern city of Luxor, told reporters Sunday that the 20-year-old woman had come up with the kidnapping scheme with her father to extract the money from the wealthy parents of her 4-year-old cousin.
They wanted the money to help out her father and pay for her wedding plans.
Hassan said the woman was arrested in downtown Cairo and she led police to where the young girl was being kept.
Kidnapping for ransom is uncommon in Egypt. But hundreds of people go missing every year, and many of the cases go unsolved.