The long-running scandal surrounding Malaysia's state development fund 1MDB has gripped the country for years, leading to arrests and multi-million dollar asset seizures.
According to a statement issued by the 1MDB task force, Mr Najib was picked up from his mansion in Jalan Langgak Duta in Kuala Lumpur at 2.35pm yesterday afternoon in relation to the probe into SRC International.
The statement said the arrest was linked to a former 1MDB unit but did not detail specific charges against him.
AFP says A Malaysian cabinet minister has since said that "Malaysian Official 1" was Najib.
Najib, who spent the night in lockup, arrived at 8.20 a.m. (0020 GMT) at the court complex inMalaysia's capital of Kuala Lumpur, wearing a dark blue suit and a red tie. "I have tried my very best but I realize that it isn't enough".
"It shows the resolve of the new Government to address previous abuses of power", she said.
Mr Najib set up 1MDB when he took power in 2009 but the fund amassed billions in debts and is being investigated in the U.S. and several other countries.
Some of Najib's children were present in the court room, including his stepson Riza Aziz who on Tuesday was questioned by anti- graft officers in connection with their 1MDB probe.
Last week, Malaysian police announced they had seized almost $275 million in cash, jewelry and luxury handbags in raids on properties linked to Najib.
- Malaysia's Attorney General clears Najib of any wrongdoing, saying US$681 million in Najib's account was a donation from a member of the Saudi royal family and that Najib had returned US$620 million in a few months. Red Granite was unavailable for comment. They say hundreds of millions from 1MDB landed in Najib's bank accounts. Red Granite in March agreed to pay the United States government $60 million to settle claims that it benefited from the 1MDB scandal.
He took the money, the charges allege, when he "participated in or involved yourself in decisions on behalf of the Malaysian government to give government guarantees for loans amounting to four billion ringgit ($1.34 billion)".
The elections swept the opposition coalition, headed by 92-year-old former premier Mahathir Mohamad, to power.
The US Justice Department, which is seeking to recover items allegedly bought with stolen 1MDB cash in America, estimates that $4.5 billion in total was looted from 1MDB.