The man was held on "suspicion of inciting racial hatred", British Transport Police (BTP) said.
"The arrest, which was supported by officers from the Metropolitan Police, is in connection with the appearance of racist 'Pokemon' style stickers on the London Underground and at bus stops throughout the capital. The man remains in police custody as enquiries continue," a BTP statement said.
The stickers mimicked the popular children's card game where players are awarded points for collecting Pokemon based on their rarity.
Mayor of London Sadiq Khan was among the images on the cards spotted at a Tube station in south London.
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He was given the name 'Hamaskhan' in an an attempt to link him to Palestinian Islamist group Hamas.
It read "Description: Probably the most dangerous Pakemon Hamaskhan believes that Londoners should learn to accept Islamic terrorism whilst he is mayor. Weaknesses: Hamaskhan's hatred of Christians and Jews will result in him losing power and a long prison sentence".
US President Barack Obama was also featured, described as "the USA's Muslim in Chief".
British police had said it was treating the cards as a hate crime as it launched an investigation last week.