Neighbors in Highland Park told The Detroit News the woman stood over Milah Perry as she bled to death Monday afternoon and then held off police for several hours. The older woman, whose name was not released, was arrested late in the afternoon.
Ernest Jones said he entered the house after hearing screams and followed a blood trail to the stairs to the basement. He said he saw Perry lying at the foot of the stairs, still alive and saying "Help me" while the other woman stood over her holding the ax up.
"Don't come here, or I'll chop her head off," he said the grandmother told him.
Jones said she told him she would not hurt the 3-year-old.
Friends said Perry, 26, was a student at Wayne State Community College and had two children. They said she was the mother of the 3-year-old and ex-girlfriend of the boy's father.
During the afternoon, the Highland Park Police chaplain led neighborhood residents in prayer, the Detroit Free Press reported.