The boy's body was recovered from the River Ericht at Cally Bridge, near Blairgowrie, at about 12:35.
He had been reported missing from a property in the nearby Milton of Drimmie area at 11:15.
Police, firefighters, a water rescue unit and air ambulance were involved in the search. No details on the child's identity have been released.
A Police Scotland spokesman said: "Around 11:15am today, police in Perthshire received a report of a two-year-old boy missing from a property in the Milton of Drimmie area, close to Bridge of Cally, in Perthshire.
"Officers immediately launched a full search of the area, with assistance from the Police Scotland helicopter and Scottish Fire and Rescue Service personnel.
"Around 12:35pm, the child was located in the River Ericht, close to the property. He was removed from the water by fire personnel and treated by paramedics, who had attended the scene with the air ambulance.
"Tragically, the boy did not survive. His family are being supported by officers at this time."
Deputy first minister John Swinney, who is MSP for Perthshire North, expressed his sympathy for the family.
He tweeted: "Heartbreaking news from the River Ericht at Bridge of Cally. My deepest sympathies to everyone involved."
Local councillor Liz Grant, who is provost of Perth and Kinross, said: "It will be absolutely devastating for the family and the community.
"It is a very small community. Bridge of Cally is a small village.
"The River Ericht is fast, the rivers are all fast coming down through that area, particularly at this time of year."

Union leaders are due to hold talks with rail bosses on Tuesday in an effort to resolve their dispute over changes to the role of guards (OBS).
They claim that on specific dates in January and February an average of three trains a day ran without an OBS.
Southern said a train could run without a guard "in exceptional circumstances".
The RMT said new figures showed that on nine days this year, when there was no industrial action, at least 26 trains did not have an on-board supervisor or second member of staff in addition to the driver.
It said this equated to three services a day, which would be 1,000 a year.
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General secretary Mick Cash said: "That's 1,000 journeys where a disabled passenger may not be able to get on or off the train or where passengers and the driver are at increased risk from anti-social behaviour or if something goes wrong, such as a derailment or fire."
He added that members feared the figures were "the thin end of the wedge" and instances were "far more widespread and increasing".
"Guaranteeing a second member of safety critical staff on every train is the only way you can guarantee access for all and a safer journey for passengers," Mr Cash said.
In response a Southern spokesman said: "We said we would roster a second person to every train that had one before, and we are.
"However we also said in exceptional circumstances when an on board supervisor is unavailable we will run the train, rather than cancel it, because it is in passengers' interests to do so."
The drivers' union Aslef has been balloting its members on a deal aimed at resolving its dispute with Southern, with the result due on Thursday.
A two-year-old boy has been found dead in a river after being reported missing in Perthshire.
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The RMT union has claimed the equivalent of 1,000 Southern rail services per year are operating without a second member of staff on board.