The development came after gardai discovered human remains in a field at the back of a house in Portlaoise.
The suspect was released without charge at midnight on Tuesday having been arrested on Monday following his return to Ireland from a trip abroad.
Sources have revealed that he was initially released from custody after it was decided that there was not enough evidence to charge him.
It is understood that the Director of Public Prosecutions was reluctant to agree to a murder charge without Aoife's body being discovered.
Information given to gardai led to officers carrying out detailed searches of the river but they quickly changed their focus and began digging at a property at the Timahoe Road on the outskirts of Portlaoise.
The investigation stepped up several gears yesterday when her body was found in an oil barrel which was buried five feet under the ground in a rubbish hole on land behind the house.
The suspect, who had been under surveillance since his release, was picked up by detectives just over six hours after Aoife's body was discovered in a field at the rear of a property.
Aoife -- who told her family that she was four months pregnant -- disappeared from Colliers View in Portlaoise a fortnight ago today.
A post-mortem was carried out on her body at Tullamore General Hospital last night.