Multiple body parts belonging to businessman David Bernat were found floating in Bangkok's Chao Praya river last month.
Police believe he was kidnapped and murdered for financial reasons, with investigators saying they have traced more than $1 million moved from the victim's bank account after his death.
Last week they named their chief suspect as Artur Segarra, 36, also a Spanish national, saying they were confident he remained inside Thailand because he had recently withdrawn money from a cash machine inside the country.
Police have released pictures of Autur Segarra believed to be involved with the murder of David Bernat. pic.twitter.com/y55TxsXlbt— Bangkok Post (@BangkokPostNews) February 5, 2016
But Cambodian police said Segarra was arrested in a restaurant on Sunday in the city of Sihanoukville.
"We arrested him yesterday late afternoon," Chuon Narin, police chief of Kampong Som province, told AFP on Monday.
He was later handed over to Thai police in the eastern province of Trat.
Thailand's Channel 3 broadcast pictures of Segarra, sporting a baseball cap and a Manchester United top, handcuffed and in Thai police custody.
The gruesome case has dominated Thai media coverage in recent days with television networks airing grim footage of officers hauling Bernat's remains out of the river.
Police questioned a Thai woman over the weekend who was allegedly seen with Segarra in recent days.
Investigators initially struggled to identify the victim. Last week police said they believed the man was of Asian origin and suggested that Chinese triads might have been involved because of the method chosen to dispose of the body.
The wide Chao Praya winds its way through Bangkok, which boasts a large network of canals, and it is not unusual for bodies to be dumped in the city's waterways. But it is rare for a foreigner to meet such a grisly fate.
Cambodian police have returned a number of high profile criminal suspects to Thailand in recent months, including one of the alleged perpetrators of last summer's Bangkok bombing and an Australian wanted for his alleged involvement in the murder of a fellow national and former Hells Angels member in Pattaya.