Joran Van der Sloot was stopped by police in central Chile while he was traveling south from the border with Peru.
"He was found in a rented vehicle on highway 68 and is now being taken to police headquarters," said Douglas Rodriguez, head of investigation police in the northern city of Arica.
Rodriguez said the Chilean government now has to decide if it will send Van der Sloot back to Peru, where he is wanted in the murder of 21-year-old Stephany Flores in a Lima hotel room. He crossed into neighboring Chile on Monday.
Chile set up checkpoints along more than 250 miles of rugged border area. Police also checked hotels, guest-houses, restaurants and casinos.
Van der Sloot was questioned after Natalee Holloway disappeared during a high school graduation trip in the Dutch Caribbean island five years ago, a case that attracted heavy media attention in the United States. He was not charged due to insufficient evidence.
Cesar Guardia, head of the Peruvian police crimes unit, said Van der Sloot and the victim were seen at a casino in Lima over the weekend and is a prime suspect in her death.