Abdula Alad, a local leader of the Abu Sayyaf group, was arrested in the southern island of Basilan, said an official statement that gave no other details about the police operation.
The Abu Sayyaf raided the Dos Palmas island beach resort in the western Philippines in 2001 and abducted 20 tourists and resort staff, including three Americans.
The hostages were taken by boat to Basilan, where most were eventually released after ransom money was paid.
However the kidnappers beheaded one American hostage, Guillermo Sobero, while missionary Martin Burnham was killed in a botched Philippine military rescue attempt in 2002.
Founded using seed money from the Al-Qaeda in the 1990s, the Abu Sayyaf is blamed for the worst terror attacks in the country.
About 600 US troops have been rotating through the southern Philippines for a decade to help train local troops in hunting the Abu Sayyaf. However the Americans are barred from taking part in combat.