The belt was later shown to contain explosives.
The man has since been identified as a 61-year-old suffering from a psychological disorder and is known to the police.
Police were forced to close Linnégatan and evacuate restaurants in the vicinity at around 5.30pm on Thursday evening, after the man threatened to blow up the number 6 tram.
Police units were able to storm the tram carriage at the Linnégatan/Olivedalsgatan stop and promptly overpower the man.
They forced him to remove his clothing, arrested him and then took him to Sahlgrenska hospital.
“The passengers were evacuated without problems. No one was hurt,” Frans Dahlén at Västra Götaland police told the TT news agency.
Bomb technicians have been able to conclude that the belt contained explosives. It could not however be detonated as the necessary electrical cables had not been correctly attached.
Traffic was seriously disrupted as a result of the police cordons covering the streets south of Linnéplatsen, one of the main thoroughfares in the western Swedish city.
The cordons were lifted at around 10pm and the city returned to normal.
The man is now suspected of attempted devastation endangering the public. He was also charged a month ago with firearms offences, according to a report in local newspaper Göteborgs -Posten on Friday morning.
The charges date back to September 6th when police were called to the 61-year-old’s home and were met with a note on the door which read: “I do not want any visits from neighbours. The situation has intensified. 357 Magnum!”.
Police then persuaded the man to open his door, at which point he explained that he was not feeling too good and that he planned to commit suicide, reaching for a shotgun in his kitchen.
The man will be appointed with a public defender on Friday and a remand hearing will probably take place on Sunday, the newspaper reports.