The seven-year-old youngster said the attack happened outside, in the village of Wool in Dorset on 14 May.
In a statement, Dorset Police confirmed officers had arrested an 11-year-old boy in connection with the attack.
The force said: “Dorset Police is currently investigating a report of a rape in Wool.
“It was reported that the incident occurred on Monday, May 14, at an outside location. The victim, a seven-year-old boy, is being supported by specially-trained officers.
“An 11-year-old boy was arrested on suspicion of rape and has been released under investigation to allow officers to establish the full circumstances around the incident.”
Speaking to the Dorset Echo, the victim’s mother, who cannot be named for legal reasons, said her son had been playing nearby when he disappeared around a corner.
He seemed “subdued” and his clothing was in disarray when he returned.