Sadiq Shah, belonging to the banned militant outfit of Lashkar-e-Islam, was apprehended by Khyber Pakthunkwa Police's Counter-Terrorism Department (CTD) near the main gate of Khyber Teaching Hospital.
Shah was wanted in a number of terror attacks in Sarband and Pishtakhara areas of Peshawar district, police said.
He carried a bounty of 5 lakh rupees, they said.
The CTD shifted the militant commander to an unknown location for further interrogation, police said.
Peshawar, the capital of the restive Khyber Pakhtunkhwa province, has seen many terror attacks, including the horrific 2014 attack on an army-run school in which nearly 150 people, mostly children, were killed on December 16.
Pakistan security forces launched operation Zarb-e-Azb against the Taliban militants.