He in turn had hired a gunman.
General prosecutor Yuriy Lutsenko, who appeared alongside Mr Babchenko, said it was necessary to fake the journalist's death so that the organisers of the plot to kill him would believe they had succeeded. "I've buried my own friends and colleagues many times myself".
Harlem Desir, Organisation for Security and Co-operation in Europe Representative on Freedom of the Media, said he was on his way to Kiev to meet the Babchenko's colleagues on Wednesday as a slew of Western foreign ministers condemned the killing.
Babchenko is a well-known critic of Russia's policies toward Ukraine.
The person recruited for the killing and the mastermind of the plot have both been arrested, the Security Service said.
"Thank God he's alive", she said, wiping tears from her eyes and hugging a visiting reporter.
For much of the night after reports of Babchenko's death were announced, and into the following day, people gathered in the apartment building's courtyard to place flowers and photographs and to mourn the reporter.
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Another praised the Ukrainian-led operation for purportedly finding the killer who received orders to murder of Babchenko - the same reason Ukrainian security services gave for the stunt. "Law enforcement couldn't fail to understand that news of Arkady Babchenko's murder would bring pain to thousands of hearts around the world".
Russian Federation denied any involvement in any murder plot, and Foreign Ministry spokeswoman Maria Zakharova later said Moscow was glad to hear Babchenko was alive, but also criticized Ukraine for staging a "provocation". More than 10,000 people have been killed in the fighting.
Vyacheslav Volodin, speaker of the State Duma, told Russian news agencies Wednesday that Russia would be happy to help with the investigation if Ukrainian authorities requested it.
Its not clear whether Russian Federation was involved in the plot to trick Babchenko's enemies.
It was reported earlier this week that the 41-year-old Russian war correspondent was shot three times in the back when he left his apartment to buy bread.
In a statement after news of Babchenko's apparent death, Russian lawmaker Yevgeny Revenko told state-owned RIA Novosti news agency: "Ukraine is becoming the most risky country for reporters".
Ilya Ponomarev, a former Russian lawmaker who also moved to Ukraine, said Babchenko continued to be threatened after he settled previous year in Kiev, where he worked as a host for the Crimean Tatar TV station.
"I am confident that the Russian totalitarian machine did not forgive him his honesty and principled stance".
He has hosted a programme on the Crimean Tatar TV station ATR for the past year. Ukraine is planed 101.