Officials of the Yokosuka police station confirmed that the suspect was arrested after he was transferred to police from the U.S. Navy's base in Yokosuka, about 30 miles southwest of Tokyo.
The suspect was identified as William Oliver Reese, 21, according to the officials who declined to be named citing police branch protocol. The hometown of the sailor was not immediately available.
The arrest came after the U.S. military agreed to hand over the suspect who admitted to Japanese police that he killed a woman.
The sailor was transferred from the U.S. Navy's base in Yokosuka Saturday afternoon to the Yokosuka police station where he was arrested, according to one of the police officials.
He said that Reese will be transferred to the Kanagawa Prefectural Police late Saturday to be detained there until Sunday or Monday, where officials will question him further.
The U.S. Navy Forces Japan said in a statement that it will continue cooperating with Japanese authorities in the case.
"The U.S. Navy's responsibility to see this matter through to its rightful conclusion does not end here, and we will continue to provide our complete support and cooperation with Japanese authorities," Rear Adm. James Kelly, the commander of U.S. naval forces in Japan, said in the statement.
The sailor was based on the aircraft carrier USS Kitty Hawk and has been in Japan since May 2004. He has been in the Navy for about two years and Japan was his first assignment, according to the Navy.
The case risks further inflaming local opposition to plans to build an American military airstrip in the southern island of Okinawa, and base a U.S. nuclear-powered warship at Yokosuka for the first time.
Reflecting the sensitivity of the case, the U.S. Embassy issued a statement Friday expressing regret for the crime.
"The U.S. military and the American people are deeply shocked and saddened by this event," U.S. Ambassador Thomas Schieffer said.
In 1995, an uproar over the rape of a 12-year-old girl by three U.S. servicemen on Japan's southern island of Okinawa triggered massive protests and led to the relocation of an air base to a less densely populated part of the island.
The rape case also resulted in an agreement with the U.S. military that it would hand over American suspects in serious crimes to Japanese authorities for pre-indictment investigation.
About 50,000 U.S. troops are stationed in Japan under a joint security pact, but Tokyo and Washington agreed in October to move 7,000 Marines from Okinawa to the U.S. territory of Guam, and shift within Japan some of the remaining troops.