Bernama cites the Malaysian Anti-Corruption Commission (MACC) which has been investigating billions of state funds that went missing while Najib was in power.
Since the election loss Najib has been banned from leaving the country and has found himself at the centre of a widening graft probe.
Malaysia's Prime Minister Mahathir Mohamad says that authorities have an "almost ideal case" against Najib and his allies.
Najib's arrest was in relation SRC International, a former 1MDB unit, a task force investigating the fund said.
A spokesman for Najib said the SRC charges and the 1MDB investigations against the former leader were "politically motivated", and that Najib will contest these charges and clear his name in court.
The U.S. Justice Department says a total of $4.5 billion was looted from 1MDB, some of allegedly landed in Najib's personal bank accounts.
Last week, Amar Singh, Malaysia police's head of commercial crime, said raids on six properties linked to Razak had led to the seizure of 12,000 pieces of jewellery valued at 880m ringgit (£165m).
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Earlier Tuesday, the anti-corruption agency questioned Riza Aziz, Najib's stepson and a Hollywood film producer, as it stepped up its probe on 1MDB. Mr Najib denies wrongdoing.
Najib would stay there overnight and be brought to court Wednesday, she added.
Riza was solemn as he arrived at the anti-graft office and didn't speak to reporters. In the USA, his production company had reached a $60 million settlement in a suit that alleged the movie was funded by money siphoned from 1MDB.
"It was the only remaining part of the investigation (following the submission of the) papers (to Thomas on June 13)".
Last week, the 1MDB taskforce team froze over 900 accounts including Central Umno and Umno Selangor, to facilitate investigation over allegation that the accounts received funds from 1MDB.
"I call on the owners of these accounts to come to MACC and we will show them the evidence and documentation that these funds came from 1MDB, then we will ask them to give back the funds willingly".