Michael Horvath, 49, was taken into custody after a search warrant was served on Thursday morning.
His arrest comes just weeks after investigators began searching his Ross Township property as part of the ongoing search for Holly Grim.
Police say bones were found on his property that matched Grim's DNA profile.
The Monroe County District Attorney's office said police interviewed Horvath because he was late for work on the day of Grim's disappearance. He allegedly claimed he had gotten a flat tire and had to return home to fix it.
In a 2014 interview, Horvath allegedly told police that he had been at Grim's home to transport a washer and dryer back in 2012.
He allegedly told investigators he had not been back since. However, the D.A. said his DNA was matched to a bloodstain found on an outside door of Grim's home, and the story didn't match the "condition of the blood."
Police say they focused on Horvath through the process of elimination.
"A lot of co-workers, a lot of friends, a lot of family, we investigated everyone. And one by one they were out, they didn't have a motive, they didn't have an opportunity, they had an alibi. We kept coming back to Mr. Horvath," said Lt. Joseph Sokolfski.
Horvath and Grim worked together at a company that makes church organs, but investigators say there was no evidence they were close.
It was shattering news for the victim's mother, Jeanette. Just days ago she told Action News he was still holding out hope that Holly was alive.
On Thursday, a family spokesperson said the Grim's were grieving, and looking for answers.
"They have a long road ahead of them, there are still a lot of unanswered questions that are going to unfold as the trial comes forward and a lot of unanswered questions that the family still has yet to answer," said Jim Wilkins.
Court records say videos were discovered in Horvath's home relating to murder, sexual deviation and "hunting humans." Also found were handcuffs, stun guns and leg shackles.
There were also hand-written notes about stalking someone.
It raises the question: could there be additional victims?
"At this point there doesn't appear another missing person related to Mr. Horvath, but again we have a lot of evidence to go through," said Sokolfski.
Police say it could take months to go through a "mountain" of evidence.