Authorities believe the two girls attended the same school in the city of Sasebo.
The victim was found in the apartment of the suspect. She had been beaten and strangled and her head and one of her hands had been removed.
The 16-year-old suspect, whose name has not been released, confessed to killing the younger girl. She also reportedly told authorities she "did it all by myself."
"We never heard of any trouble between them," the school principal told local media outlets. "I'm absolutely shocked by this."
A similar incident occurred 10 years ago in the same city when an 11-year-old girl fatally stabbed her 12-year-old friend.