The man was arrested later ion the day after police dogs sniffed him out in an isolated forest cabin in the vicinity of the town.
The suspect was remanded into custody on Sunday on suspicion of murder and is set to undergo a psychiatric assessment, according to a report in the Dagens Nyheter daily.
The man however denies the murder charge, admitting only to aggravated manslaughter and aggravated assault.
The 81-year-old victim took his dog out walking on Thursday when he encountered the younger man just a few hundreds yard from his home.
Witnesses later reported spotting the man along the road earlier in the day wearing "odd clothing", carrying a backpack and what appeared to be a drum.
A passing motorist who tried to intervene during the attack had his car windshield smashed with the axe before the attacker disappeared into the forest.
The victim died after being rushed to hospital.
The brutal axe attack has meanwhile left the small rural community of 4,500 residents in shock.
"This is a small place and everyone known everyone," father-of-two Peter Rydfjäll, 43, told the Aftonbladet newspaper at the time.