Chen was seen in TV news footage high raising his hands and showing the handcuffs before being taken to Taipei district court, where a judge could officially approve the arrest.
He was questioned by prosecutors for about six hours since Tuesday morning. It was the fifth time in the past six months that he was interrogated for allegations of laundering money and misusing a special fund during his eight years in office that ended in May.
So far prosecutors have interrogated 15 suspects including Chen's wife, son, daughter-in-law, assistants and friends. Eight of them were in custody.