Brooke Bennett's body was found about 4:45 p.m., not far from her uncle's home, said State Police Director Col. James Baker.
The girl's uncle, Michael Jacques, who has been in custody since Sunday on sexual assault charges involving another underage girl, is to be charged in federal court with kidnapping, police Sgt. Tara Thomas said.
Bennett was last seen alive with Jacques at a convenience store last Wednesday.
"The painful discovery of Brooke's body today is tragic and heartbreaking," Baker said.
He called the death "clearly suspicious" but declined to give details before a planned briefing Thursday morning.
Earlier Wednesday, in an affidavit unsealed in U.S. District Court in Burlington, the FBI said an unidentified 14-year-old girl told investigators she was present on June 25 when Jacques, 42, tricked Bennett into thinking she was going to a party and took her to his Randolph home to be initiated into a sex ring.
The girl said she was led to believe that the 12-year-old "would have sex with adult males" during the initiation.
The teenager said she and Bennett watched television for a while before Jacques told her to leave and took his niece upstairs. The witness said she left the house with her boyfriend and didn't see Bennett again.
The 14-year-old said she herself had been having sex with Jacques since she was 9, as part of the sex ring.
Bennett's former stepfather, Raymond Gagnon, appeared in federal court Wednesday on an obstruction of justice charge in the case. He was denied bail and was held pending a Monday hearing.
Police say Gagnon, 40, lives in Texas but often visited Vermont. According to the affidavit, he told police he accessed his former stepdaughter's MySpace page from a computer at his San Antonio home after getting login information from Jacques.
Police said they have evidence that postings to the account were altered to make it appear that the 12-year-old had discussed a secret rendezvous shortly before she disappeared.
Gagnon also told police he had downloaded child pornography onto the laptop, according to the affidavit.
Bennett's mother, Cassandra Gagnon, said she was "very surprised" by her ex-husband's alleged involvement.
---Associated Press writer Wilson Ring in Burlington contributed to this story.
