Without naming the new suspect, Chief Prosecutor Agneta Blidberg said on Wednesday there was a higher degree of suspicion against him for the killing of the foreign minister.
"Another man has been arrested on a higher degree of suspicion," Blidberg said.
No evidence, however, would be disclosed until prosecutors had deliberated with the Stockholm Court about new suspect's detention.
The earlier suspect, Per Olof Svensson was set free after police failed to secure evidence to link him to the crime.
"He is no longer suspected of the murder," the prosecutor said.
"Another man has been arrested on a higher degree of suspicion"
Police described the latest arrest as "undramatic."
"The investigation is now in a new phase, that is why we can't say anything," Leif Jennekvist, head of the Stockholm police serious crime division said.
He described the new suspect as being "not unlike" the man whose picture was captured on the video of the departmental store where Lindh was stabbed to death on 10 September.
The suspect is being held in the Kronoberg jail at Stockholm police headquarters.
Jennekvist stressed that the investigation had been conducted on a broad front, with the police pursuing several parallel leads.
Lindh, one of Sweden's most popular politicians, was stabbed as she was shopping all by herself in a store. She died hours later, plunging the country into grief.