Police officials arrested the 69-year-old former military leader this morning and took him to the court of judicial magistrate Muhammad Abbas Shah.
The police officials informed the magistrate that they did not need physical custody of Mr Musharraf and he could be placed in judicial custody.
However, lawyers for several persons who have filed petitions against Mr Musharraf for imposing Emergency in 2007 and detaining over 60 members of the superior judiciary contended that he should kept in police custody.
They also questioned why Mr Musharraf had not been handcuffed by police after his arrest.
His lawyer Qamar Afzal argued that his client should be kept in judicial custody as there were serious threats to his life. The magistrate reserved his verdict in the matter and Mr Musharraf left the court complex after waiting for some time for a decision.
Footage on television showed Mr Musharraf being led into the magistrate's small office by dozens of policemen and paramilitary personnel. He looked shaken and was wearing a waistcoat over a salwar kameez.
Sources said that authorities had asked for Mr Musharraf to be placed in judicial custody as this would allow the administration of Islamabad to declare his farmhouse at Chak Shahzad a 'sub-jail' and detain him there.
Authorities have been focusing on this measure as officials are not keen on holding Musharraf at a jail due to threats to his life.
The arrest came a day after the Islamabad High Court ordered the arrest of Mr Musharraf for not cooperating with police officials investigating a case registered against him for detaining dozens of judges, including Supreme Court Chief Justice Iftikhar Chaudhry, during the 2007 Emergency.
However, immediately after Justice Shaukat Aziz Siddiqui revoked his pre-arrest bail and ordered police to detain him, Musharraf and his security detail fled from the Islamabad High Court complex and drove to his farmhouse.
Mr Musharraf's lawyers were unable to file an appeal in the Supreme Court yesterday as they were unable to complete certain formalities before the court closed for the day.
Analysts said Mr Musharraf's arrest could put the judiciary in conflict with the powerful military, which would not like to see a former chief being humiliated or insulted in public.
The analysts further said that if Musharraf was put on trial, members of the current military leadership, including army chief General Ashfaq Parvez Kayani, could be dragged into the matter as they were part of Musharraf's inner circle when he imposed emergency rule in 2007.
Mr Musharraf has had to grapple with numerous legal problems since he returned to the country last month after nearly four years in self-exile.
Earlier this week, he was disqualified from contesting next month's general election, effectively ending his ambitions for a political comeback. Authorities have also barred him from travelling out of Pakistan.