The international police organisation last month put Kenyan national Feisal Ali Mohammed on a list of nine most wanted suspects linked to crimes against the environment.
"Feisal Ali Mohammed was arrested by Interpol officers in Dar es Salaam. He was then booked in Musimbasi police station at 10:42 pm last night," Kenya's Director of Public Prosecutions said in a statement.
It said he is facing charges in Kenya's port city of Mombasa for "dealing and possession of elephant tusks" weighing more than two tonnes and equivalent to at least 114 poached elephants, which were found during a raid in June.
Two alleged accomplices, Abdul Halim Sadiq and Ghalib Sadiq Kara, were arrested then, but Mohammed managed to escape and has been on the run since. According to an Interpol source, Mohammed was caught in "a string operation" conducted in conjunction with Tanzanian police.
He is the second of the nine alleged "environmental criminals" listed by Interpol to have been arrested since the Interpol appeal last month. Earlier this month, Zambian national Ben Simasiku was arrested on charges of possessing ivory from Botswana.
In November, Interpol said the arrest of the suspects would "contribute to the dismantlement of transnational organised crime groups who have turned environmental exploitation into a professional business with lucrative revenues."
Ivory is sought out for jewellery and decorative objects and much of it is smuggled to China, where many increasingly wealthy shoppers are buying ivory trinkets as a sign of financial success.
A sharp rise in poaching in Kenya, which is home to an estimated 30,000 elephants and just over a thousand rhinos, has sparked warnings from conservation groups that the government is losing the fight against the slaughter.