The jeep kept moving, Benedict kept waving and then proceeded with the audience as if nothing had happened.
At least eight security officers who were trailing the vehicle as it moved slowly through the square grabbed the man and pinned him to the ground.
The pope is protected by a combination of Swiss Guards, Vatican police and Italian police.
The Vatican spokesman, the Reverend Federico Lombardi, identified the man only as a 27-year-old German who showed signs of "mental imbalance".
The man was questioned by Vatican police, before being taken to a hospital for psychiatric assessment.
"His aim was not an attempt on the pope's life, but to attract attention to himself," Lombardi said.
The man - who was wearing a pink T-shirt, dark shorts and a beige baseball cap and sunglasses - leapt over the barricade from what appeared to be the second or third row back.
Since the 9/11 attacks, the Vatican has tightened security in St Peter's Square when the pontiff is present.
All visitors must pass by police to get into the square, with some going through metal detectors or being frisked by metal detecting wands.
The vehicle the pope uses in St Peter's Square is uncovered, while the one used outside the Vatican and on trips overseas is fitted with bulletproof glass.
Though it was quickly over, the episode recalled the attempt on the life of John Paul II, Benedict's predecessor, on May 13, 1981, also in St Peter's Square.
Calvi case verdict
In a separate development related to the Vatican, all five defendants charged in the 1982 murder of Roberto Calvi, an Italian financier who was known as "God's banker" for his close ties to the Vatican, were acquitted on Wednesday, the ANSA news agency reported.
Calvi was found hanging under Blackfriars Bridge in London, with rocks and bricks stuffed into his pockets, after the collapse of Banco Ambrosiano, whose major stockholder was the Institute for Religious Works, the Vatican bank.
A London coroner initially ruled that he had commited suicide after fleeing to London to avoid prison for fraud, but a later inquest reached an open verdict.
Prosecutors who reopened the case in 2002 have ruled out suicide and say Pippo Calo, a former Sicilian Mafia financier, ordered Calvi's murder as punishment for his mishandling of the Cosa Nostra's money deposited in Banco Ambrosiano.