Officials in Libya say Saif al-Islam Gaddafi has been captured near the town of Obari in the south of the country.
He has been on the run since the fall of the government of his father, Muammar Gaddafi, in August.
Said al-Islam, 39, is the eldest son of Colonel Gaddafi's second wife and was considered the heir apparent.
He is wanted by the International Criminal Court for crimes against humanity during the uprising against his father.
A militia force allied to the National Transitional Council said Saif al-Islam was captured on Saturday with several aides, as they tried to smuggle him out to neighbouring Niger.
NTC Justice Minister Mohammed al-Allagui confirmed the capture and said Saif al-Islam would be transferred to the capital, Tripoli, soon.
The International Criminal Court in The Hague says it has been officially notified of the arrest.
The BBC reports celebrations began on the streets of Tripoli shortly after the news of the arrest emerged.
The capture leaves Colonel Gaddafi's former intelligence chief, Abdallah Senoussi, as the only Libyan ICC suspect still at large.
Colonel Gaddafi himself was killed on 20 October after being captured during the final battle for his hometown, Sirte.
