Nadasha Begay, 22, faces charges of third-degree felony aggravated battery with a deadly weapon, battery on a peace officer and resisting and obstructing an officer.
Nicole Begay, 23, remains in good condition at San Juan Regional Medical Center, a hospital spokeswoman said.
Deputies believe the sisters were arguing about family loyalty or money when "Nadasha picked up a kitchen knife and eventually stabbed her sister in the neck," according to police records.
Nicole suffered a punctured lung and underwent a CT scan, according to police records.
Deputies continue to investigate the circumstances surrounding the incident, sheriff's Lt. Cory Tanner said.
Search warrants are pending.
Deputies responded about 9:30 p.m. Sunday to a residence on County Road 5099, where they heard screaming coming from inside.
Deputies forced entry into the home and found Nicole. Nadasha was in a back room of the house. She was put into handcuffs, but while deputies were assisting Nicole, Nadasha fled out of the back of the house, according to police records.
She was located minutes later. While deputies placed Nadasha in the back of a deputy's vehicle, she allegedly spit on one of the officers.
Nadasha was taken to Lee Acres substation, where she "admitted to the stabbing but contradicts all the witness statements," according to police records.