Police said the suspect, called Gandishananda Zerathabada, was coming to the girl's house to perform the rituals of the Hindu religion in order to pray for her sick father.
The girl's mother hoped that the man, who introduced himself as a Hindu teacher, could ease the family's pain.
But the girl claimed to have raped her whenever he had the chance.
The girl said she grabbed a knife Friday and attacked him when he tried to rape her and then contacted the police themselves, she said.
Rescue teams rushed the man to a local hospital for an urgent operation.
"The 54-year-old man was admitted to the hospital at 12.39 a.m. Saturday (1930 GMT) and his penis was cut by 90 percent and hung from him," the hospital said in a statement.
He underwent surgery to stop the flow of blood from him and allow the urine to exit properly.
Deputy police commissioner Arul Krishna told The Times of India that the girl's father had been bedridden for years.
The victim told her mother that she had been raped but failed to report to the authorities.
The girl is not expected to face criminal charges.
Kerala's local government chief Pinaray Viiyan hailed the girl's "courage," adding that cutting the man's penis "shows courage and strength."
Authorities in India, after the mass rape of a medical student on a bus in the capital Delhi and her death later in 2012, have tightened the punishment of rape.
Some protesters have repeatedly called for hanged rapists, the most severe punishment under the Indian Penal Code for rape.
However, India has experienced violent sex attacks on women.