Antonio Troitino, 56, was on conditional release from jail in England but Spain had maintained an extradition warrant for him.
He was arrested in London under "a Spanish police warrant", said a Spanish interior ministry official who asked not to be named.
Troitino was released from prison in October under a ruling by a European rights court which shortened the jail time of scores of ETA convicts.
But the Spanish courts demanded Britain send him back to Spain to answer unsettled charges against him, judicial officials said.
In the 1980s, Troitino was a member of ETA's Madrid unit, which carried out some of the separatist group's bloodiest attacks.
He was arrested in 1987 and sentenced to more than 2,000 years for 22 killings.
A legal bungle in April 2011 set Troitino free and before it was resolved he went on the run to London, where he was arrested the following year.
In October 2013, he was among scores of ETA members released under the ruling by the European Court of Human Rights, which outraged the families of people killed by the group.
ETA is blamed for more than 800 deaths in a four-decade campaign of bombings and shootings for an independent homeland in northern Spain and southwestern France.