Zdravko Tolimir was a top aide to the Bosnian Serbs' wartime commander, Ratko Mladic, during the massacre of thousands of Muslim men and boys in Srebrenica in July 1995.
His arrest was welcomed by the European Union, with Enlargement Commissioner Olli Rehn caling it an "important step" toward bringing all remaining fugitives to justice.
Olga Kavran, a spokeswoman for the Hague tribunal's chief prosecutor, Carla Del Ponte, also welcomed Tolimir's arrest.
"We hope that those we believe to be most responsible for the genocide in Srebrenica -- Ratko Mladic and Radovan Karadzic -- will follow suit," Kavran said.
Tolimir was considered the third-most-wanted war crimes suspect still at large in the Balkans, after Mladic and the wartime political leader, Karadzic.
The indicted general was arrested late yesterday in the border region between Republika Srpska and Serbia in a joint operation by police of both republics.
"We blocked wider area and the local police stations cooperated," the police commander of the Republika Srpska, Gojko Vasic, told journalists in Banja Luka. "One person was arrested without personal documents and late on we concluded that it was General Tolimir and he was arrested."
This is the first time that police of Republika Srpska, a region of Bosnia-Herzegovina, have detained an indicted war crimes suspect.
(with material from Reuters, AFP, AP)