A spokesperson for Scotland Yard said: 'Officers have arrested a 72-year-old man on suspicion of misconduct in public office.
'He was arrested at an address in Camden on Monday, 23 February and has been taken to a London police station for interview.
'This follows search warrants at two addresses in the Wiltshire and Camden areas.'
It came after police raided his homes in London and Wiltshire a fortnight ago.
He had been spotted at both addresses in recent days, after a period of lying low in London following the release of the second batch of the Epstein files.
Lord Mandelson's arrest comes days after Andrew Mountbatten-Windsor was taken into custody on suspicion of misconduct in public office.
He was released on Thursday evening after 12 hours in custody. The former Duke of York has previously denied any wrongdoing.
The
Metropolitan Police earlier this month launched an investigation following allegations that Lord Mandelson sent market-sensitive information to Epstein while he was business secretary in Gordon Brown's government during the financial crisis.
Scotland Yard said its probe into Lord Mandelson over alleged misconduct in public office would 'take some time' after officers finished searching his homes in London and Wiltshire.
Lord Mandelson has denied the Epstein files show he broke any laws or acted for personal gain. He has repeatedly said he regrets his friendship with Epstein.
It comes after MPs were told the first tranche of documents related to Lord
Mandelson's appointment as the US ambassador is expected to be released within weeks.
Chief Secretary to the Prime Minister Darren Jones told the Commons that the first release demanded by MPs on February 4 would happen 'very shortly in early March'.
Documents released in the US Epstein Files showed he leaked information to the billionaire child abuser while he was a government minister during the Blair era.
That led to calls for details of how he came to be made the UK's top official in Washington last year to be made public.
However, shadow Cabinet Office minister Mike Wood criticised the delay, saying it would mean a month or so had passed since a so-called 'humble address' was passed by MPs - including
Labour - to force the government to act.
'That is not a polite suggestion, it is a formal commend from parliament to the executive,' he said.
'Three weeks later the government's progress moves with the urgency of a tired sloth on a Bank Holiday Monday.'
Lord Mandelson earlier this month
bowed to public pressure and resigned his seat in the House of Lords.
His former lobbying business collapsed into administration last Friday after an exodus of clients following revelations about his links to
Jeffrey Epstein.