The woman faces charges of kidnapping and murder and could be executed if found guilty.
The baby girl was found alive and taken to a Topeka, Kansas, hospital, where she was “doing great”, according to US attorney Todd Graves.
Lisa Montgomery confessed to strangling Bobbie Jo Stinnett, 23, in her home in Skidmore, Missouri, and then cutting the baby from Stinnett’s womb, according to an FBI affidavit. She was arrested in Kansas on Friday.
According to the Kansas City Star newspaper, Mrs Montgomery had paraded the baby around her home, taking her into a local cafe along with her unsuspecting husband, Kevin, where she told stories about a successful pregnancy.
Authorities said she had a miscarriage six months into a pregnancy earlier this year, a development her husband apparently was unaware of.
Computer forensics and an anonymous tipster helped police find the baby, CNN reported.
The FBI alleges that Mrs Montgomery contacted Bobbie Jo Stinnett, a dog breeder, through a chat room and the two agreed to meet at Mrs Stinnett’s home to talk about Lisa Montgomery’s wish to buy a dog.
Mrs Montgomery contacted Mrs Stinnett after seeing a website about the dogs that Stinnett bred. The site included a picture of Bobbie Jo Stinnett, showing she was pregnant.
After Mrs Stinnett was found dead with her stomach cut open, a search for the baby began.
Computer investigators gathered information from her computer and internet providers and got their first leads on Lisa Montgomery, the affidavit says.
After uncovering the link to Mrs Montgomery, authorities immediately began surveillance of her home about 208km away in the neighbouring state of Missouri and saw her with a baby.
They also saw a red car matching the description of one seen outside the Stinnett’s house.
Mrs Montgomery told her husband she had gone shopping in Topeka, and went into labour there.