BBC reports that the National Bureau of Criminal Investigation chief, Leandro Osorio, as saying that the two women's bodies were found in Cablotales village, near the River Aguagua.
The two women were spotted leaving a party in the Santa Barbara region before they went missing. The beauty queen had been due to compete in the upcoming Miss World contest in London.
Four people, including Ms Alvarado's boyfriend, have been questioned over the disappearance while a suspect had been detained and weapons as well as a car has been seized.
Police Chief, Osorio added that a "protected witness" had provided valuable information.
The two women were last seen alive in a car without a licence plate as they left a birthday party on November 13.
A UN report states that Honduras has the world's highest homicide rate, with 90.4 people murdered per 100,000 of the population.
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