S Devarayudu, a resident of Nandakota village who worked as a watchman, suspected his wife's fidelity and also had differences with her over dowry issue.
Following a tiff with his wife Nagamani, he attacked her and three-year-old daughter Keerthana with a stick.
Keerthana died on the spot, while Nagamani was rushed to King George Hospital in the city, they said.
Damodhar Naidu, Sub-Inspector of Police at Ananthagiri, said they have arrested Devarayudu on murder and dowry demand charges.