A public prosecution service statement released on Tuesday confirmed that Frans van Anraat was arrested in Amsterdam on Monday, charged with "supplying thousands of tonnes of raw materials for chemical weapons between 1984 and 1988".
The United Nations also described Van Anraat as Hussein's most important middleman for acquiring chemical materials, prosecutors said.
He is suspected of breaching the law of war and of complicity to genocide, and will be brought before a court in the Dutch town of Arnhem later this week.
The 62-year-old is believed to have worked through a Panamanian company based in Lugano, Switzerland, according to investigations by authorities in the Netherlands, the United States, Switzerland, Italy, Germany, Belgium and Jordan.
Previous arrest attempts
A criminal investigation by US customs authorities based in Baltimore a few years ago found that Van Anraat had been involved in four shipments of thiodiglycol - an industrial chemical used in making mustard gas - to Iraq.
The shipments originated in the US, were shipped to Europe, and reached Iraq after passing through Belgium's Antwerp port and Aqaba in Jordan.
Iraqi Kurds want to see Saddam
supporters brought to book
Washington had asked the Dutch government to arrest Van Anraat in December 1997, but police could not track him down, according to a transcript of parliamentary questions to the Dutch interior minister last year.
The request for his arrest was withdrawn in November 2000 without an explanation.
Van Anraat was detained in Milan in January 1989 following a US request, but he was released after two months.
Massacre of Kurds
He then went to Iraq where it is thought he stayed until the US-led invasion of 2003 when he returned to the Netherlands through Syria, the prosecution said.
"According to the United Nations, the Dutchman is one of the most important middlemen in Iraq's acquisition of chemical material," prosecutors said in a statement.
"The man is suspected of supplying thousands of tonnes of raw materials for chemical weapons between 1984 and 1988."
Iraq used the weapons in the 1980-1988 war against Iran and against the Kurdish population in northern Iraq, including in the notorious attack on the town of Halabja in 1988, in which an estimated 5000 people were killed, prosecutors said.