The journalist, Khadija Ismayilova, "was ordered to spend two months in pre-trial detention on absurd charges of driving a person to suicide," her lawyer Elton Mamedov told AFP.
"Her arrest is a punishment for her journalistic work," he added.
Mamedov said that prosecutors had demanded Ismayilova's arrest after a former journalist at Radio Liberty's Azerbaijani service, where Ismayilova used to be bureau chief, accused her of "inciting him to commit suicide."
The journalist, Tural Mustafayev, says he attempted suicide in September because Ismayilova sacked him several years earlier.
If convicted, Ismayilova could face a prison sentence of up to seven years.
Dunja Mijatovic, the media watchdog of the Organisation for Security and Cooperation in Europe, condemned Ismayilova's arrest as "orchestrated intimidation."
The arrest "is a part of the on-going campaign aimed at silencing her free and critical voice," Mijatovic said in a statement.
Ismayilova, who has won several awards for her work exposing corruption among officials in the energy-rich Caspian Sea country has repeatedly said she is being harassed over her anti-graft campaigning.
She said in October that the authorities in the tightly-controlled ex-Soviet state had banned her from leaving the country in a bid to stop her high-profile reporting.
In 2012 Ismayilova said she was the victim of blackmail, after a covertly-filmed video with sex scenes purportedly involving her was posted on the Internet.
Rights groups said the footage was released by supporters of strongman President Ilham Aliyev in retaliation for Ismayilova's work exposing his daughters' alleged business interests.
In a leaked diplomatic cable from 2009 published by Wikileaks, Aliyev is said to have described Ismayilova as an "enemy of the government" and asked the American ambassador to Baku to intervene to get her dismissed by US-funded Radio Liberty.
Dissent in Azerbaijan is often met with a tough government response. Rights groups say the government has been clamping down on opponents since Aliyev's election to a third term last year.
Aliyev, 52, came to power in 2003 following a controversial election. He took over after the death of his father Heydar Aliyev, a former KGB officer and communist-era leader who had ruled newly independent Azerbaijan with an iron fist since 1993.