Catherine Hutin-Blay, the daughter of Pablo Picasso's second wife Jacqueline Roque, filed a complaint against art dealer Olivier Thomas in March after noticing some of her paintings were on the market, the source said, confirming a report in British daily The Telegraph.
She had also spotted some of the works in photographs of the art collection amassed by Russian oligarch Dmitry Rybolovlev, president of the AS Monaco football club.
They were pictured in news articles about a separate case in which Rybolovlev was allegedly defrauded by Swiss businessman Yves Bouvier, who is accused of selling him paintings by major artists at inflated prices.
Olivier was taken into police custody on Monday, police sources told AFP and prosecutors have opened a judicial inquiry into theft, receiving stolen goods and fraud.