Senior Abu Sayyaf leader Shari Amiruddin, also known as Abu Omar, was "the planner" of the May 2001 kidnappings on the western island resort of Dos Palmas and also took part in "bombing operations" in several southern cities, the military said on Tuesday.
He was arrested in the southern city of Zamboanga on Monday by army intelligence agents.
An Abu Sayyaf band led by Amiruddin raided the Dos Palmas resort and seized more than a dozen hostages, including the US Christian missionary couple Martin and Gracia Burnham and Peru-born California resident Guillermo Sobero.
Sobero was beheaded while in captivity while Martin Burnham was shot dead during a rescue attempt in June 2002. His wife Gracia was rescued.
The hostages were taken by boat to the jungles of Basilan, a rugged island in the southern Philippines and a rebel stronghold.
They were kept in near starvation and moved from camp to camp in shackles as the Abu Sayyaf rebels eluded a massive manhunt that lasted for over a year.
The Filipino hostages were freed one by one, allegedly in exchange for ransom.
The previous year, the Abu Sayyaf seized 21 European and Asian tourists from the Malaysian resort island of Sipadan. All of them were freed after Libya offered funds for their release.
The US State Department considers the Abu Sayyaf a "foreign terrorist organisation" which once received funding from Osama bin Laden's al-Qaeda network.
The group is also responsible for the worst terrorist attack in the Philippines, fire-bombing a passenger ferry off the main island of Luzon in February 2004, killing more than 100 people.
Last week, a Singapore-based security analyst said the Abu Sayyaf had been cultivating links with the Jemaah Islamiyah, a Southeast Asian militant group blamed for the October 2002 and 2005 bombings in Bali, Indonesia.