Police Chief Gordon Huiras said a body buried in a barrel in a property rented by a neighbour of the girls was identified as the 12-year-old Ashley on Monday through dental records.
Miranda's body had been identified earlier after being found in a nearby shed.
The two girls vanished in January and March this year respectively in Oregon City, near Portland.
The case has attracted international interest following the high-profile kidnapping and murder of three young girls in the states of California and Utah, and of the 10-year-olds Holly Wells and Jessica Chapman in Britain.
A police official said the man who rented the house, 39-year-old Ward Weaver, was now a suspect in the case, although he has yet to be charged.
However, Chief Deputy District Attorney Greg Horner has said that he will present the case to a grand jury.
Mr Weaver has been in police custody since August on unrelated rape charges and denies any involvement in the girls' disappearance.
A spokeswoman for the Federal Bureau of Investigation, Beth Ann Steele, said investigators did not expect to find any more bodies on the property but wanted to clear it to make sure.
Tears
Outside the house, friends and well-wishers turned the police fencing into a makeshift memorial, decorated with flowers, notes and soft toys.
"We are never going to forget what happened," said Miranda's grandfather Wes Duffey. "This is going to hurt my daughter for the rest of her life."
Many burst into tears when the police announced their discoveries, and some angrily questioned why the house was not searched sooner.
Local residents had demanded that police remove the concrete slab behind Mr Weaver's rented house following his arrest.
Mr Weaver is in custody on suspicion of raping the girlfriend of his 19-year-old son.
After he was jailed on 13 August, his son told police officers that his father had killed Ashley - who knew the family well - and then her friend Miranda.
'Like a daughter'
Ashley Pond's family last saw her eating breakfast with her younger sister before school on 9 January.
On 8 March, her friend Miranda Gaddis also vanished from the same run-down neighbourhood.
Detectives interviewed residents and made nationwide appeals for information on television but failed to find a suspect until Mr Weaver's distraught son made the accusation against him.
Ashley was a friend of Mr Weaver's daughter and had spent time in the house.
Mr Weaver told the Associated Press in an interview in July that he had treated her as a daughter whenever she visited.
However, she accused him in the summer of 2001 of having molested her sexually - an accusation he denied and for which he was not charged.
Mr Weaver's own father is in prison on death row for murdering a woman and burying her body in his yard.