Mohammed Badie, 70, the Supreme Guide of the Muslim Brotherhood, was arrested in an apartment close to Rabia al-Adawiya square, where Islamist supporters of Morsi held a vigil before it was cleared in a bloody crackdown by security forces last week.
The detention of Badie could throw the Brotherhood into further disarray as the Islamist group continues to protest the ouster of Morsi by the army on July 3. The Brotherhood quickly responded to the government's move by appointing Mahmoud Ezzat as the supreme guide of the group.
Badie is facing charges of inciting violence and murder over the killing of eight anti-Brotherhood protesters outside the movement's headquarters in Cairo last June.
Badie was being taken to Tora prison, the same Cairo prison that former President Hosni Mubarak is now being held, media reports said.
The state news agency said in a statement that "information came to the security apparatus locating his place of hiding."
Egyptian satellite channel ONTV later broadcast live footage showing Badie sitting on a couch in an unidentified location after being captured. A policeman holding a rifle was seen standing next to him.
The arrest comes days after his 38-year-old son, Ammar, was shot dead during protests in Ramses Square.
A state of emergency is in force amid a crackdown on Islamists opposed to the army's ousting of Morsi, almost 900 people have been killed.
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