Sheila, 12, and Katharine Lyon, 10, were last seen in March of 1975.
Initially questioned by police in 1975, Lloyd Lee Michael Welch became a suspect in 2013 after cold-case detectives revisited the case.
Welch is already imprisoned for child sex crimes in Delaware.
Police said a detective reviewing the evidence made a link between Welch and a composite sketch of the suspect. Investigators then interviewed Welch in prison and uncovered more evidence.
When Sheila and Katharine disappeared, the then 18-year-old Welch was at the Wheaton Plaza Mall, where the girls were headed that day in 1975.
Welch and his uncle had been named as persons of interest in the case before, and his wife was charged with perjury after testifying before a grand jury about the case last year, denying his involvement.
He wrote to the Washington Post disclaiming his role in the girls' disappearance.
Police affidavits obtained by the Washington Post show that Welch claims he left the mall with the girls and that his uncle sexually assaulted them. He said he then left and "never saw the girls again".
The Washington Post reports that Welch had bloody clothes in a backpack and asked a relative in Virginia to wash them, spurring investigators to think the blood have might belonged to the two girls.
Authorities have been searching for the girls' remains since last year in Bedford Country, Virginia, where Welch family members own land.
Welch pleaded guilty to child sex crimes in 1994 and 1997.
Police in Maryland have charged a convicted sex offender with the murder of two girls - 40 years after the sisters went missing from a shopping centre.