Maria Tudorica was taken in Nine Acres Close, Newham, east London, at 16:37 GMT on Sunday after the car she was in was stolen.
Scotland Yard tweeted just before 20:00 GMT to say she had been found less than a mile away in the Ruskin Avenue area.
Maria was in the front seat of a black Audi A5 (registration number FY58 UAZ) when her father met an unknown man who wanted to sell the car but the theft jumped in the car and drove away with the 17-month old girl still in the car. The vehicle was found empty and abandoned later that day. A huge police search was then launched to find Maria.
Maria was found by a member of the public on a street wearing an additional item of clothing which is believed to belong to the car thief or a member of the public.
When she was found Maria’s uncle, car trader Gheorghe Stelica, 25, said: “God bless. I feel born again.
“I feel am a new guy. I feel over a thousand times relief. My brother, he’s happy. He thank so much the police for their service.”
Mr Stelica said his brother had placed Maria in the car as he demonstrated the engine but the thief had jumped in and drove off. The man who had taken the car is described as Asian, slim build and dressed in black clothing.
The Met Police has appealed for any information or witnesses particularly about who gave Maria the piece of clothing.
Anyone with information is asked to contact police via 101 quoting reference 4480/6Jan. You can also call Crimestoppers anonymously via 0800 555 111 or tweet police via @MetCC
