According to the charges presented at the remand hearing in Stockholm on Sunday, the man is being held on probable cause suspected of murder.
The suspect's defence lawyer Clea Sangborn told news agency TT that the man is shocked by the allegations against him and denies having committed the crime.
The victim, a 25-year-old man, was walking home from a party in October 1996, when he was attacked, stabbed and robbed outside Swartling riding school on Valhallavagen in Stockholm.
When the murder was committed the suspect was a 22-year-old economics student and according to media reports police believe that he rang the emergency services himself to report the incident.
The suspect was detained on Thursday shortly after a warrant was issued for his arrest. The charges come as a result of a breakthrough by the Stockholm police cold case unit which is tasked with investigating unsolved murders.
The cold case unit, which works on 2-3 cases at a time, began to explore the possibility that the man who had made the call could have been the same person who had carried out the offence. While this line of inquiry led to the arrest of the 39-year-old man on Thursday, police were unwilling to confirm if they believe it to be the same person.