The man, Borko Ilincic, 33, has been sentenced to life in jail in the United Arab Emirates for a ram-raid in a Dubai shopping mall in 2007, "one of the most famous robberies in history", Spanish police said in a statement.
They arrested him in the suburbs of Madrid under an international arrest warrant.
The Pink Panthers are suspected of robbing items worth €330 million ($450 million) in luxury stores around the world since 1999, cross-border police agency Interpol says on its website.
They got their nickname from British police in 2003 when gang members in London hid a stolen diamond in a pot of beauty cream, a trick used in one of the "Pink Panther" comedy films.
Of the gang's estimated 220 members, most are thought to be from the countries of the former Yugoslavia, including some former members of the military.