Taha Yasin Ramadan was arrested around 1100 GMT on Monday, the official told journalists in Arbil adding that he had been handed over to US occupation forces immediately.
Another party official in Sulaymaniya, where Jalal Talabani's PUK is based, confirmed the arrest of the ex-vice president, a Mosul native and listed among the 55 most wanted members of the former Iraqi government.
A US Army Central Command spokeswomen in Baghdad confirmed the arrest a few hours later.
Ramadan, a member of the Revolution Command Council, was the 10 of diamonds on the pack of cards issued by American forces.
His arrest brings to 38 the number of wanted former Iraqi officials captured or killed since Iraq was invaded and occupied by US-led forces.
Rise to prominence
Born to a peasant family in the northern region of Mosul, Ramadan worked as a bank clerk after completing his secondary education.
Ramadan held numerous senior posts in the former Iraqi government since the Baath Party seized power in 1968.
US forces still desperate to
apprehend the former president
When made industry minister in the 1970s, he reportedly told colleagues: "I don't know anything about industry. All I know is that anyone who doesn't work hard will be executed."
He once led the Popular Army, a large paramilitary force tasked with protecting the government. It was disbanded in 1991 when he became vice-president.
Ramadan has been accused by exiles of crimes against humanity for his role in crushing the Shia uprising in Southern Iraq in 1991 and his alleged involvement in the killing of thousands of Kurds in the north in 1988.
Washington has shown considerable interest in him for some time, after opposition forces claimed he received Usama Bin Ladin's deputy, Ayman al-Zawahiri, in Baghdad in 1998. But this has never been proved.
Just before the invasion, Ramadan told the pan-Arab mbc television channel the Bush administration "is Zionist ... more Zionist than the Jews".
Ramadan survived a number of assassination attempts, including two in 1997 and one in 1999.