Frank Nweke, the Nigerian information minister, said Taylor, who is wanted on war crimes charges by a UN-backed court in Sierra Leone, should be placed in the custody of the Liberian government.
Wednesday's arrest comes a day after Nigerian authorities said Taylor had disappeared from the villa in southeastern Nigeria where he has lived in exile since he stepped down in 2003 as part of a deal to end 14 years of civil war in Liberia.
Haz Iwendi, a police spokesman, said: "He was arrested in Borno state, at the Cameroon border, in the early hours of this morning. He's in the custody of security agencies in Borno."
Police in Borno said Taylor was detained at the Gamboru-Ngala border crossing, a remote outpost in the arid northeast.
The arrest was the latest twist in a complex saga involving Nigeria, Liberia, Sierra Leone and the United States.
Liberia asked Nigeria on March 5 to hand over Taylor to a special UN-backed court in Sierra Leone, where he is accused of supporting brutal rebels in exchange for diamonds to finance the Liberian conflict.
Nigeria responded on March 25 that Liberia was free to take him into its custody. It made no mention of Sierra Leone and gave no details as to when and how a transfer was supposed to take place.
Then on Tuesday, Nigeria said Taylor had disappeared from his residence, causing an international outcry.
Some US congressmen urged George Bush, the US president, to cancel a planned meeting with Olusegun Obasanjo, the Nigerian president, on Wednesday.
Washington has been pressing Nigeria for years to send Taylor to stand trial in Sierra Leone.