The suspect, identified as Amin Aklam, was wanted for kidnapping and attempted murder, said Roque Merdigia, chief of the police's anti-transnational crime unit.
Aklam, a "hardened" member of the Abu Sayyaf terrorist group, was arrested in a slum neighbourhood of a Manila suburb, Merdigia added.
The Abu Sayyaf group is currently holding captive at least 10 foreign hostages, including a Dutch bird watcher kidnapped in February 2012.
Aside from the high-profile kidnappings, the al-Qaeda linked group has also been blamed for some of the deadliest attacks in the Philippines.
Last month, Abu Sayyaf claimed responsibility for a deadly bomb attack in the southern city of Davao that killed 14 people.
- DPA