The four-year-old went missing yesterday in the Springtown area of Derry.
She was last seen in the company of a woman at that time.
The PSNI believed she may have left the city and been taken to the Republic of Ireland, most likely Donegal.
In an update this afternoon, Inspector McManus said: “We would like to inform you that we are no longer looking for four-year-old Scarlet Duddy who was reported missing from Derry yesterday.
“Scarlet has been found safe and well this afternoon.
“I want to thank the public for their help with our appeal.”