Kimberley was three and Kelly just 10-months-old when they disappeared, reported missing by their father Russell Yates on August 27, 1985.
Mr Yates was told of the arrest by police soon after and is said to be “relieved”.
“I’ve always been trying to find my children. And now at least it’s up to them to get in touch with me,” he told WCVB.
“What happens with my ex-wife, I really feel bad about. But we gotta find out what’s going on,” he said, adding that he didn’t want to see her prosecuted.
“That ain’t going to help her, me or anybody else at this point. I just want to see my kids.”
The case had captivated the US for many years, even featuring on television show America’s Most Wanted.
In 1988 Mr Yates told The Providence Journal that his wife had discovered he had been unfaithful and had threatened to move out with the children. He also admitted to hitting her during an argument a few weeks before the disappearance.
Police are yet to provide details on the trio’s whereabouts for the last 31 years beyond Ms Yates’ pseudonym.
It remains unclear whether or not the girls knew they had been taken.
She is now facing two counts of child snatching and a sentence of up to 20 years in prison if found guilty.