The man, for whom an international arrest warrant had been issued via Interpol, is "wanted for war crimes," Bertil Olofsson, who heads the international section of the Swedish criminal police, told AFP.
He was arrested in an "undramatic" fashion in or around his home in Jämtland, a western region halfway up Sweden, Olofsson said.
"We have indications that he has been in Sweden since 2009 but that is not confirmed for sure," he added.
According to a local prosecutor, an international warrant had been issued for the man, who is suspected of having committed war crimes, including genocide, in Bosnia.
“When it comes to suspicions like genocide, the case is handed over to the office for international prosecution. I'm just on my way to hand over the case,” prosecutor Eva-Lena Rimér told the local Östersunds-Posten (ÖP) newspaper.
According to the police, the arrest took place within the last 24 hours and more information will be forthcoming later in the day on Wednesday.
“I've never been a part of anything like this. I don't really know how we're supposed to handle this situation,” said Maria Olofsson, head of the Jämtland criminal police, told the newspaper.
A Bosnian-born Swede in his forties was arrested in northern Sweden in January 2010 on suspicions of committing war crimes against Serbs in 1992 during the Bosnian war.
His trial opened in Stockholm in October and is to last until the end of March.
In April this year, a Serbian man in his 30s was arrested in Sweden in relation to suspicions of war crimes that occured in Kosovo in 1999.