Up to 30,000 people were killed or disappeared during a crackdown on left-wing students, trade unionists, academics and dissidents during military rule in Argentina between 1976 and 1983.
Cavallo is accused of being involved in the disappearance of many of the 5,000 people who were detained in the notorious Navy Mechanics School in Buenos Aires.
He faces charges of murder, illegal detention, torture, extortion, theft and falsifying documents.
The former naval officer allegedly played a key role in interrogation sessions at the school, which has since been turned into a memorial museum to the victims.
His lawyers have vehemently denied accusations of wrongdoing.
Cavallo arrived at the Ezeiza airport south of Buenos Aires wearing handcuffs and a bulletproof vest.
He was then taken off in a car amid intense security and will be held at the Marcos Paz prison where other military and police officials accused of human rights violations are also held.
Spanish prosecutors had requested several life sentences for Carvallo for his alleged part in the torture and deaths of Spanish citizens.
When Cavallo was extradited to Spain, it was the first time one country had handed over a suspect for trial in another for human rights crimes alleged to have been committed in a third.