Kabuga, who has been accused of financing the 1994 genocide, was living near Paris under a false identity.
Félicien Kabuga, a businessman indicted for complicity in the Rwandan genocide, was arrested on Saturday after living under a false identity.
The Rwandan genocide took place in 1994 and resulted in the deaths of 800,000 people.
The arrest "is a reminder to all those responsible for the genocide that they can be brought to justice, even 26 years after their crimes," said Serge Brammertz, the chief prosecutor of the International Residual Mechanism for Criminal Tribunals, the UN court responsible for investigating crimes related to the genocide.
Kabuga was living in Asnières-sur-Seine and is now 84 years old.
He was part of the inner circle of Rwandan President Juvénal Habyarimana whose assassination on April 6, 1994, triggered the genocide.
Kabuga chaired the radio company that broadcast calls for the murder of Tutsis. He also controlled the National Defence Fund (FDN), which collected "funds" intended to finance the logistics and weapons of Hutu militiamen, according to the international indictment.
He had been sought for years and nearly escaped an operation to arrest him in 1997 and in 2003, the non-profit organisation TRIAL International has said.