General Pinochet - still a Chilean senator and the holder of a diplomatic passport - was informed of his arrest at a clinic where he is recovering from back surgery. The 82-year-old is now under police guard.
London's Metropolitan Police said they were acting on a warrant from Spain, where General Pinochet is being investigated over the deaths of Spanish citizens during his years of power in Chile between 1973 and 1990.
It is not known whether he can be compelled to give evidence, or even extradited. The Chilean ambassador, Mario Artaza, said he believed the general had diplomatic immunity.
The Chilean Foreign Ministry has lodged a protest with the UK government over the arrest.
Pressure for detention
The UK Foreign Secretary, Robin Cook, had been under growing pressure to prevent the former dictator from leaving the UK until he is questioned concerning alleged human rights abuses.
On Wednesday, two Spanish judges investigating abuses which took place in Chile and Argentina in the 1970s and 1980s asked UK police to prevent Mr Pinochet from leaving the country until he could be questioned about the allegations.
Juan Garces, a lawyer involved in the Chile investigation, said the request had been sent to Scotland Yard via Interpol.
He said it was based on the European Convention on Terrorism.
Amnesty International also asked the Spanish government to call on the British authorities to make General Pinochet answer questions.
And the chairman of the UK's all-party Parliamentary Human Rights Group, Ann Clwyd, wrote to the foreign secretary saying action should be taken.
General Pinochet had surgery for a herniated disc at the London Bridge Hospital on Friday. He was said to have arrived in Britain with his wife and two bodyguards.
Chile's 'dirty war'
Judge Garzon and his colleague, Judge Manuel Garcia Castellon, are investigating allegations of murder, torture and disappearances of Spanish nationals in Chile between 1973 and 1990.
The judges also want to question General Pinochet about his alleged involvement in Operation Condor, in which several South American military regimes co-ordinated anti-leftist campaigns.
General Pinochet ousted the socialist President Salvador Allende in a 1973 coup and remained commander-in-chief of the Chilean army until March this year.
Senatorial immunity
He finally handed over the role after accepting a life senator post which was created for him by the constitution drafted by his own regime.
Under the terms of the constitution he became immune from prosecution in Chile.
Human rights campaigners accuse General Pinochet of being behind the murder of thousands of leftists who were killed in a Santiago football stadium shortly after the coup and in the months and years following the military takeover.
General Pinochet's regime is also accused of assassinating at least one political dissident in the US.
Country profiles
Chileans react with disbelief
(17 Oct 98 | Americas)
The Spanish connection
(18 Oct 98 | Europe)
Pinochet's rule - repression and economic success
(09 Mar 98 | Americas)
President of Chile, Eduardo Frei
Chilean Army
Spanish judge justifies charges of genocide
Amnesty International - UK
Direchos Chile: Human Rights in Chile
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