Police sources said 11 skeletons were recovered from the house of Munnilal, who was arrested and interrogated.
The two girls, Seema, 7, and Choti, 4, were daughters of one Umesh Yadav. They were playing outside their house on Thursday evening, when Munnilal allegedly took them to his house by offering them chocolates.
When girls did not return home till late evening, their family started searching for them, and found them in Munnilal's house.
The family of the girls said Munnilal was getting the children ready for a sacrifice to goddess Kali.