The boy was found when a TV journalist heard his whimpers, emerging with a bump on his head and some scratches but in otherwise good condition.
Nicola Tanturli had wandered away from his isolated home in the Apennine mountains sometime during the night on Monday, and was the subject of an intense round-the-clock search and Italian media coverage.
Church bells rang out in celebration in the town of Palazzuolo sul Senio, near Florence, when the boy was found, a mile from his home.
A journalist for RAI state television covering the story said he was walking up a dirt road towards the family home when he heard whimpers from a ravine heavily covered in trees and brush.
"I started to yell, 'Nicola', to understand if it could be the child. I heard 'mamma'," Giuseppe Di Tommaso said.
"I started to repeat the word 'mamma', because children of that age repeat words. When I intuited that it could be Nicola, I went down into the ravine."
He said he could see the child on the other side, about 10 metres away in a hard-to-reach area thick with thorny brush.
A car drove by at that moment, and Mr Di Tommaso said he hailed two Carabinieri paramilitary officers, who initially disbelieved that the sounds could have come from the boy, "this being an area full of animals that make sounds that can sound like a child".
Carabinieri commander Danilo Ciccarelli said he climbed some 25 metres down the embankment, expecting to find a small deer.
"Instead, Nicola popped out, with his little head among the high grass. He said, 'mamma', and I went towards him. He hugged me right away," the commander said.
The officer said he checked the boy's condition, finding only some scratches and a small bump on his head, before carrying him up the embankment and reuniting him with his parents.
"It was a tremendous joy to bring him back to his mother's arms," Mr Ciccarelli said.
The commander said he did not believe the boy spent the night where he was found, because the brush and grass was not tamped down, and that it was likely he had arrived through the woods, not from the road.
"He is a very active child, very lively," Mayor Gian Piero Philip Moschetti told a news conference.
"He could walk for a kilometre (half-a-mile) an hour. We have no idea how much distance he could have covered. He was used to going out of the house and living outdoors."