Military spokesman Lt Col Ramon Zagala said military intelligence and National Bureau of Investigation agents arrested Jovito Palparan in a hideout in a district of Manila.
Justice Secretary Leila de Lima said the arrest of Palparan shows that the Aquino government is determined to "end the culture of impunity" characterized by rampant human rights violations under Aquino's predecessor, Gloria Arroyo.
Palparan, 63, has been on the run since December 2011 after a court issued a warrant for his arrest in the kidnapping and disappearance of two female left-wing activists in Bulacan province north of Manila in 2006.
Human rights groups and a UN investigator have blamed security forces for the deaths and disappearances of about 1,000 activists between 2001 and 2010 under Arroyo. The former president gave the military a free hand in what it called an all-out war against communist rebels.
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Aquino's government has said it wants justice for the missing students, Karen Empeno and Sherlyn Cadapan, to improve the Philippines' human rights record after a decade of abuses under the Arroyo administration.
"The human rights community, domestic and international community, has long waited for this," de Lima told reporters.
A breakthrough in the case came yesterday when naval intelligence agents checked a tipoff from an informant and spotted Palparan in the crowded suburban Manila neighborhood, said military intelligence service chief Maj Gen Eduardo Ano, who headed a task force assigned to capture the fugitive general.
In 2012, Aquino doubled the reward for the capture of Palparan, along with a former governor wanted in the killing of an environmentalist and a former congressman convicted of murdering his wife, to USD 45,600 with officials saying the president was unhappy at the lack of progress in arresting high-profile fugitives.