The head of the Ukrainian Security Service, Vasily Gritsak, told reporters at a news conference Wednesday that Kiev faked Babchenko's murder in an effort to catch those trying to kill him. "As a result of the operation, one person has been captured, he is being held".
"Olechka, I am sorry, but there were no other options here".
But on Wednesday, an emotional Mr Babchenko appeared before reporters saying he had been part of a special Ukrainian operation to thwart a Russian attempt on his life, and that he was fine.
Ukrainian officials led by Prime Minister Volodymyr Groysman accused Russian Federation of being behind the killing of the Kremlin critic, a charge that Moscow batted back.
On February 27, 2017, he wrote on social media that he had left Russian Federation. It later emerged from police that he died in the ambulance. Gritsak added that the detained Ukrainian national's coconspirators consist of former participants of Kiev's ongoing military operation in eastern Ukraine.
News of the "death" of the prominent Russian war correspondent and former soldier set off a series of recriminations between Kiev and Moscow, and pictures and flowers were laid by mourners at the Russian embassy in Kiev.
Ukrainian Prime Minister Volodymyr Groysman said in a social media posting late on Tuesday he was convinced that what he called "the Russian totalitarian machine" had not forgiven Babchenko for what Mr Groysman called his honesty.
"This is the last post of Arkady Babchenko".
Russian investigators have opened their own investigation into the killing and said they are ready to cooperate with Ukraine.
In one, he said he felt no regret about the deaths of Russian army choir members and others from a December 2016 plane crash as they were heading to perform before Russian troops in Syria. "He was a true friend of Ukraine who told the world the truth about Russian aggression".
"The killers should be punished", he wrote.
Details of the sting operation were not clear, including why authorities chose to go to such lengths to make it look as if Babchenko was dead.
Kiev has in recent years seen a number of deadly attacks on high-profile figures, including journalists and politicians.
In a further weird move, it appears that numerous regime officials who yesterday blamed Russian President Vladimir Putin for ordering the killing of the journalist had not coordinated their story with other regime officials who now claim that the big lie was perpetuated to "throw off" plans of an actual "Putin agent" assassin.
Another auto bomb killed Ukrainian military intelligence officer Col Maxim Shapoval in June 2017 in what the Ukrainian authorities called a terrorist act. Last year, Russian lawmaker Denis Voronenkov was shot and killed outside a hotel in Kiev.