Prosecutor Gaspar Armando Garcia Torres said Walter Lee Williams, 64, is wanted on charges of sexual exploitation of children and traveling abroad for the purpose of engaging in sexual acts with children.
Garcia said Williams was captured late yesterday while drinking coffee near a park in the Caribbean beach town.
"This person is wanted by the FBI because he is linked to the sexual exploitation of children," Garcia told reporters.
He said it wasn't clear how long Williams had been living in Playa del Carmen and that the fugitive also had an address in nearby Cancun, where he was taken and turned over to Mexican immigration officials.
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A federal arrest warrant was issued for the former Palm Springs, California, resident in Los Angeles in April, according to the FBI website.
The indictment alleges Williams traveled from Los Angeles to the Philippines in January 2011 to engage in sex acts with two 14-year-old boys he met online in 2010, the US Department of Justice said in a statement on Monday.
While in the Philippines, Williams allegedly engaged in sex acts with both boys and produced sexually explicit photos of one of the boys. Williams fled the Los Angeles area approximately one week after returning from the Philippines, it added.
"Williams has an extensive history of travel throughout the South East Asia region, specifically the Philippines," the FBI said. "He has reportedly resided in Indonesia, Polynesia and Thailand."
The FBI added Williams to its Ten Most Wanted Fugitives list on Monday.
"I analyzed the computers and the camera that belong to Williams and found child pornography," said Special Agent Jeff Yesensky, in a video about Williams posted on the FBI's website Monday to bring attention to the case.