No arrests have been made so far in the incident.
The baby's father Gangadhar, a labourer, and one mediator named Linganna allegedly sold him ten days ago, Nizamabad Rural police said quoting a complaint lodged by the Integrated Child Development Services (ICDS) authorities.
Following the complaint, an investigation was launched and the infant was rescued from Dubba area of the district yesterday.
He was later taken to a 'Shishugruha' (child home) in Nizamabad town, a senior police officer said. Gangadhar had tried to convince the baby's mother for an abortion, but dropped the idea after Linganna persuaded him that the newborn could be sold for money, police said.
"The woman, who allegedly had an affair with Gangadhar, delivered the boy in Nizamabad government hospital a month ago.
However, anganwadi workers, who fed the baby found it missing about ten days ago and the mother also did not give a proper reply about the matter," an ICDS official said, adding that the complaint was lodged due to her unsatisfactory reply.
The woman, who was counselled, claimed that Gangadhar and Linganna had "sold" the baby for a sum of Rs 1.5 lakh, and after this the duo were being questioned.
However, nobody has been arrested as yet, the police officer said.