Officers searching for the three-year-old from Edinburgh found remains in Kirkcaldy, Fife, late last night.
Mikaeel was reported missing by his mother on Thursday morning, sparking a major hunt involving hundreds of police officers and local volunteers.
Today a body was removed from a wooded area behind a property in Dunvegan Avenue, where neighbours said Rosdeep Kular, 33, used to stay. Residents said it is occupied by her sister, Mikaeel's aunt.
Police said they "strongly believe" the body is that of the youngster and have detained a person, understood to be Ms Kular.
A memorial service will take place at 7pm tonight at Muirhouse St Andrew's Church near the home Mikaeel shared with his mother, twin sister and three other siblings.
Floral tributes, soft toys and candles have been placed at a small park in the Drylaw area, round the corner from the flat on Ferry Gait Crescent.
Scotland's First Minister Alex Salmond said the discovery of a body was "the news we have all been dreading".
"The hearts of everyone across Scotland and beyond have been touched by the events of recent days.
"We should at this difficult time remember the work of the officers of Police Scotland who have responded to this difficult task and investigation and shown such professionalism and dedication."
Residents of Dunvegan Avenue, around 25 miles away, spoke of their shock at seeing police activity on their street this morning.
Olga Park, a retired nurse who lives opposite the bungalow in Kirkcaldy, said Mikaeel's mother had lived there with her sister when she had Mikaeel.
The resident, who has lived in the area for 30 years, said she saw Ms Kular arrive at the home on either Tuesday or Wednesday morning.
She said: "I'm just absolutely shocked about what's happened.
"The fact he's just a three-year-old boy is just terrible. The poor wee thing."
Michael Woods, 53, who lives nearby at Floors Place, said he had been following the developing police investigation but was surprised to find officers at the end of his street.
"First it was in Edinburgh, then they said Fife, then Kirkcaldy and now it's here almost on my doorstep. It's unsettling," he said.
"When I heard it was here I just about jumped off my chair."
Police Scotland Assistant Chief Constable Malcolm Graham said last night: "As a result of enquiries the body of a young child was recovered in Fife just before midnight.
"We strongly believe this to be the body of Mikaeel.
"A person has been detained in connection with the recovery of the body and members of Mikaeel's family have been informed of the recovery.
"Our thoughts and sympathies are with them at this time."
Ms Kular reported putting her son to bed at 9pm on Wednesday and said when she went to check on him at 7.15am his bed was empty.
His jacket and shoes were missing and police said he may have left of his own accord. Last night, almost 48 hours after Mikaeel went missing, they said they had "grave concerns" for his safety and that he may have been the victim of a crime.
Robert Pearson, chairman of the Tenants and Residents in Muirhouse (TRIM) association, said all local residents are invited to this evening's service.
He said in a statement: "I, like everyone else in North Edinburgh, will be saddened to learn that police have found the body of a child in the search for Mikaeel.
"Over the last few days this community, as well as people from all over the country, has come together to search for him.
"Obviously as time went on we were all aware that the chances of a positive were diminishing but that never stopped us."