Aftab Ali was nabbed from Faizabad.
An official announcement giving details of the case is expected in a few minutes.
The arrest comes in the background of a Pakistani military court sentencing Kulbhushan Jadhav, an ex- Indian Navy person, to death on charges of espionage.
While the Indian government claims that Jadhav is innocent and has not been given a fair trial, Pakistan says Jadhav was using his ‘business’ in Iran as a cover for espionage activities.
India has tried to get access to the ex-Navy person for several months, but has been unsuccessful in doing so.
Tensions are high between the nuclear-armed rivals, largely owing to both staking claims over Kashmir.
India also accuses Pakistan of training and sending mercenaries and Islamist radicals across the border to create unrest in the India-held half of Kashmir. Pakistan, on its hand, has accused India of fanning the flames of separatism in its Baluchistan province.
Pakistan also feels that India played a crucial part in the creation of Bangladesh out of East Pakistan.