Rustem Mustafa was detained in the Kosovo capital, Pristina, at 1600 local time (1400 GMT).
His arrest was requested by an international prosecutor as part of an investigation, UN police said.
Mr Mustafa was a regional commander of the now-defunct Kosovo Liberation Army (KLA) in the Podujevo region of northern Kosovo during the 1998-1999 war with Belgrade.
It is not known when the alleged crimes were commited or who the victims were.
Investigation continuing
A UN statement said: "The investigation is focused on evidence linking the suspect to the torture and murder of at least five illegally detained persons."
"The prosecutor in this case has requested that the suspect be detained pending the conclusion of the investigation," it said.
During the conflict, Mr Mustafa - known by his nom de guerre as Remi - controlled Kosovo's northern border, known as Llap region.
After the war he joined the Kosovo Protection Corps (KPC), created to deal with civilian emergencies after Nato troops took over the province.
He served as a regional commander of the Gnjilane region.
'Threat to peace'
But last year Mr Mustafa was dismissed from the KPC after the US included him on a list of 22 ethnic Albanians believed to be a threat to peace in the Balkans.
Three former KLA members were arrested earlier this year on suspicion of attacking and murdering fellow Albanians.
The UN police said an international judge will decide whether to charge Mr Mustafa once the investigation is complete.
If he is indicted, the case will be tried by a panel of international judges, the police said.