The two men, aged 24 and 29, were arrested earlier on Wednesday, as forensic testing confirmed that a body located near a golf course on the city outskirts belonged to Baghsarian.
They were charged with murder and detaining a person with intent to ransom and occasion actual bodily harm.
Both were previously known to authorities for minor matters.
Police said: “Early inquiries established that Chris Baghsarian was not the intended target of the kidnapping and had been taken in a case of mistaken identity.”
Baghsarian’s family have welcomed news of the arrests, and requested the media respect their privacy.
New South Wales Robbery and Serious Crime Squad Commander Andrew Marks described the attack as “somebody’s worst nightmare”.
“The fact that an innocent man was taken from his home is not acceptable,” he said, quoted by AFP.
“These people need to be held to account for that.”
In the days after the kidnapping, police made several pleas for those who had taken Baghsarian to safely return him as he had health issues and needed daily medication.
Police have said the discovery of two burnt-out cars and a raid on an abandoned property in Dural, an outer suburb of Sydney, led them to an area in nearby Pitt Town where they found the remains.
Authorities have urged any witnesses who saw anything near the golf course on 14 February – the day after the kidnapping – to contact police.