Gemma Glover, 27, from Glasgow, said he had been staying with his grandmother Jacquie McCartney in New Cumnock for the past few months.
She told reporters: "It's such a massive relief.
"Police searched the loft three times last night but came in with specialist equipment this morning.
"I've never felt anything like it, it was crazy. All night I was thinking how cold it was and in my mind I was like 'he's not survived that'.
"It was so cold last night and we genuinely thought he was out the house. The main thing is he's all right. I can't explain the emotion, it's crazy."
Carson had wrapped himself in insulation and was tucked away at the end of the loft, she added.
He had last been seen in the Afton Bridgend area of New Cumnock at about 7.20pm on Sunday.
The police helicopter, marine and dog units, and Scottish Fire and Rescue Service water support unit were all involved in looking for the child.
However, police have now confirmed that he has been found. In a social media post, South Ayrshire Police said: “We are pleased to report 7-year-old Carson Shephard who has been reported missing from New Cumnock.
"Officers would like to thank everyone who assisted in the inquiry.”