The attack killed 118 Iraqi civilians and members of the National Guard.
Interior Ministry spokesperson Faisal al-Qadi was quoted by the Jordan News Agency (Petra) as saying on Monday the report, written by journalist Hadi Abd al-Latif Nasur, was "void of the truth and fabricated".
Nasur published a story saying that Raid al-Banna, a Jordanian who died in Iraq recently, was the one who detonated the explosives-laden car in a crowded market area in al-Hilla.
"As the news was categorically untrue, Nasur has been arrested and is facing trial," al-Qadi told Petra.
Such fabricated news harms Jordan, which denounces and condemns all forms of terrorism and is very much interested in preserving Iraq's security and unity, al-Qadi added.
Some media reports in Iraq and Jordan had said the family of al-Banna held a funeral service for him to honour him as a "martyr" after carrying out the Hilla attack.
Protesters burning Jordan's flag
during a demonstration in Basra
The family denied he was involved in February's al-Hilla attack, but his father said he received a call a few days after the bombing from an unidentified man telling him that his son had died as a "martyr" in Iraq.
He added the last time he heard from his son was six months ago, when he left for Saudi Arabia.
Iraqi demonstrators on Monday burned the flag of the Jordanian embassy in Baghdad in protest at the alleged involvement of al-Banna in the attack.
Jordan condemned on Monday "all forms of terrorist operations in Iraq", and "affirmed its solidarity with families of the innocent victims of these terrorist acts".
Prime Minister Faisal Fayiz said "Jordan's King, government and people stood by the Iraqi people in their steadfastness against terrorism".
"We strongly condemn the terrorist actions against the
Iraqi innocents which are done by some people who do not belong to Islam but make it an excuse for their crimes," Fayiz told Petra on Monday.
Culture Minister and government spokesperson Asma Khadir also condemned the attack.
"The blast in Iraqi town of al-Hilla is a terrorist crime we strongly condemned," Khadir said in a weekly press briefing on Monday.