Gary McKinnon, 39, of Wood Green, north London, faces extradition proceedings over claims he hacked into 53 military and Nasa computers in 2001 and 2002.
The US government believe tracking and correcting the alleged problems has cost around $1m (£570,000).
Mr McKinnon is being held at a central London police station and will appear at Bow Street Magistrates Court.
Mr McKinnon was arrested by officers from the Metropolitan Police Service Extradition Unit on Tuesday night around 1830BST.
The unemployed computer systems administrator, who is known on the internet as `Solo', is due to appear in court on Wednesday.
He is accused of hacking into computer networks operated by Nasa, the US Army, US Navy, Department of Defence and the US Air Force.
One of the networks belonged to the Pentagon.
If he is extradited and found guilty, Mr McKinnon faces a maximum penalty of five years in prison and a £157,000 fine.
The Briton was indicted in 2002 by a Federal Grand Jury on eight counts of computer-related crimes in 14 different states.
It claimed that he hacked into an army computer at Fort Myer, Virginia, obtained administrator privileges and transmitted codes, information and commands.
He is accused of then deleting around 1,300 user accounts.
The indictment alleged Mr McKinnon also "deleted critical system files" on the computer, copied a file containing usernames and encrypted passwords for the computer, in addition to installing tools to gain unauthorised access to other computers.
A loss of over $5,000 (£2,725) to the Army stemmed from the alleged damage, according to the indictment.
At the time of the indictment, Paul McNulty, the US Attorney for the Eastern District of Virginia, said: "Mr McKinnon is charged with the biggest military computer hack of all time." SOURCE