Ahmed al-Mughassil , described by the FBI in 2001 as the head of the military wing of Saudi Hezbollah, is suspected of leading the attack that killed 19 U.S. service personnel and wounded almost 500 people.
The June 25, 1996, bombing at Khobar Towers, a military housing complex, was the deadliest terror attack targeting U.S. forces since the 1983 bombing of the U.S. Marines' barracks in Beirut that killed 241 American servicemen.
Saudi paper Asharq Alawsat, which first reported the development, said he was arrested in Beirut and transferred to Riyadh.
The Saudi Interior Ministry had no immediate comment. The U.S. official spoke on grounds of anonymity because this person was not authorized to publicly discuss the matter.
Al-Mughassil, also known as Abu Omran, is one of 13 people named in a 2001 indictment in Alexandria, Virginia, in connection with the bombing. Charges include murder of federal employees and bombing resulting in death. None of the 13 has yet been brought to court to face charges, according to court documents.
The lead prosecutor listed in court records from 2001 is James Comey, now the FBI director.
In the Khobar attack, terrorists parked a fuel trailer truck just outside the shallow perimeter of the apartment complex, 85 feet away from one of the eight-story buildings. The blast demolished one side of the building, leaving a massive crater.
The U.S. later moved its Air Force contingent to the Prince Sultan Air Base, a vast compound in a remote stretch of desert south of the Saudi capital, Riyadh.
A U.S. federal grand jury indictment named 13 Saudis and one Lebanese man for the bombing, saying they were part of the Saudi Hezbollah terrorist group. That group was founded by members of the desert kingdom's Shiite minority who fled into exile in the 1980s to escape what they said was persecution by the kingdom's Sunni majority.
The 2001 indictment placed heavy blame on Iran for nurturing the attack but stopped short of mentioning any Iranians by name or linking them directly to Khobar. However, in 2006, U.S. District Judge Royce C. Lamberth ruled the Iranian government financed the bombing, ordering it to pay $254 million to the attack's victims. Iran repeatedly has denied being involved.