The 28-year-old soldier from Florida was arrested Tuesday by the Italian carabinieri military police and is being held at a prison in Pisa.
The US has the right to request his extradition. The US marines took part in the investigation.
The unnamed suspect was serving at Camp Darby between Pisa and Livorno in Tuscany region.
During a search of his home and office, police found child pornography on his computer. The seven-year-old victim was the daughter of a friend.
The victim was identified by a teacher in Tuscany after Italian investigators worked on clues from a video such as images of a beach in Livorno and the alligator symbol of the University of Florida's football team.