State media said former army chief Sarath Fonseka was taken into custody by the military police to be charged with unspecified 'military offences'.
Gen Fonseka led the army to victory over Tamil Tiger rebels last year, ending a 37-year war.
The 59-year-old retired four-star general, who lost to President Mahinda Rajapakse in the 26 January election, was arrested by troops who stormed the offices of the main opposition alliance which had backed his candidacy.
'They forcibly took away General Fonseka while he was having a discussion with three other senior opposition leaders,' said a spokesman for the People's Liberation Front (JVP).
'The general refused to be taken away. They grabbed him and virtually carried him away after threatening the others,' the spokesman said. 'There must have been over 100 soldiers.'
The office was cordoned off by heavily-armed troops who blocked reporters and photographers from entering the building and taking pictures.
Witnesses said that Gen Fonseka's campaign manager, Senaka de Silva, was also taken away.
Hours before the arrest, Gen Fonseka had told reporters at the same office that he would face any international inquiry into alleged war crimes committed by Sri Lankan troops in the final stages of battling Tamil Tigers last year.
In contrast, the government has resisted international calls for an investigation amid charges that a senior defence official ordered the killing of surrendering rebel leaders in cold blood.
'I am prepared to go before any investigation and give evidence,' Gen Fonseka said.
'I am not prepared to protect anyone, if they have committed war crimes. It is unpatriotic to protect anyone who has committed war crimes.'
