Iranian judicial authorities said Saeed Mortazavi was taken into custody late Monday but gave no official reason for the action, The New York Times reported Tuesday.
The arrest follows Ahmadinejad's disclosure of a secret film showing Mortazavi discussing a purportedly fraudulent business deal with Fazel Larijani, 49.
The arrest of Mortazavi is viewed as the latest round in an escalating power struggle between Ahmadinejad and the politically powerful Larijani family, the Times said.
Ali Larijani, 55, is the head of Parliament and one of his brothers, Sadegh Larijani, 52, is an ayatollah who heads Iran's judiciary. The eldest brother, Mohammad-Javad Larijani, 61, is a U.S.-educated mathematician and one of the main theoreticians of Iran's political ideology.
Mortazavi has been a controversial figure in Iran, known for closing dozens of reformist newspapers while he was a judge and sharing responsibility for the death of three protesters in a police prison facility.