Police have found the body of missing mother of two Karen Chetcuti near Lake Buffalo in the state's north-east.

Ms Chetcuti, 49, from Whorouly, near Wangaratta, had not been seen since she was reported missing on Wednesday after failing to show up to work at the Wangaratta council.

Search efforts focused around Lake Buffalo, south of Myrtleford, on Monday. The body was found in the scrubland at the Lake Buffalo weir wall off Croppers Creek Road about 1.35pm. 

CCTV footage of Karen Chetcuti leaving ALDI in Wangaratta on Tuesday.

Police are yet to formally identify the body but it is believed to be Ms Chetcuti. 

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Police arrested Ms Chetcuti's neighbour Michael Cardamone, 48, on Sunday in connection with the suspicious disappearance. 

Though Mr Cardamone told Fairfax Media on Friday he was the last to see her, he denied any involvement in her disappearance.

Victoria Police divers search the the Ovens River for Karen Chetcuti. Photo: Mark Jesser

Mr Cardamone is assisting police with inquiries. No charges have been laid.

In a bizarre twist, Fairfax Media understands Mr Cardamone was arrested after he phoned relatives on Saturday claiming he had been kidnapped and was in the boot of a car.

Police, who were notified of the call by his solicitor, located the car in Melbourne, eventually intercepting it in Ringwood after Mr Cardamone allegedly evaded police. 

SES begin another search for missing woman Karen Chetcuti late on Saturday. Photo: James Wiltshire

Police, along with SES crews including dive teams, have been searching the areas of Whorouly and Myrtleford trying to find any sign of Ms Chetcuti since her disappearance.

 The body of missing Whorouly woman Karen Chetcuti has been found by police.

The last confirmed sighting of Ms Chetcuti was at the Whorouly Hotel on Tuesday at 7.20pm. 

Ms Chetcuti's burnt-out red Citroen was found found on a dirt road near Myrtleford at 5.15am on Thursday.

When police searched her home they found the lights on and her phone and handbag left behind.

Ms Chetcuti lived alone at the Whorouly property, sharing custody of her two teenage children with her former husband. 

Speaking before her body was found, friend Greg Haysom said Ms Chetcuti was a "major part of Whorouly" and recently helped raise over $20,000 for the football club change rooms.

Mr Haysom described Ms Chetcuti as a "great mother" to her two children. 

"I don't think you will find anyone who would say a bad word about her, she has the most infectious smile," he said.