Four others were arrested in Majorca, Spain, and a fourth man was held in Germany for allegedly producing and spreading violent videos to recruit would-be terrorist fighters online for the terrorist group.
In the UK, West Midlands Police's counter-terrorism unit arrested the man at a property in Birmingham in the early hours of Wednesday as they executed the European Arrest Warrant.
"The investigation focuses on terrorism material created for use online. The man will be taken to Westminster Magistrates Court to seek his extradition to Spain," the police said.
He is said to have been wanted by several countries for his leadership of the group of men arrested across Europe today.
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The Spanish investigation began in 2015 when officers discovered videos promoted by the British imam that documented the recruitment, indoctrination and journey to Syria of a young Muslim resident in Spain, according to the Spanish ministry's statement.
It alleges that the cell devised and circulated videos with violent content and organised secret weekly meetings to recruit young people to travel to conflict zones to fight.
He is alleged to have recently travelled to the Spanish island to meet the four Spain-based men to discuss indoctrinating others.
The man arrested in Germany allegedly had contact with the others and had taken part in recruitment videos made by the group.
Police forces from the UK, Spain and Germany cooperated using European Union (EU) agencies - Europol, Eurojust and Sirene - set up to help share information related to fighting crime within member states.