Following a tip-off, the 32-year-old man, Christopher Paul Neil, was picked up in the north-eastern city of Nakhon Ratchasima, 250 km from the national capital, Bangkok.
Neil, who faces 20 years in jail if convicted, was brought to a news briefing at Bangkok, but did not answer questions.
Interpol had appealed for help after experts unscrambled digitally-distorted photos of the suspect.
The international police agency sparked a worldwide manhunt when it launched its first global appeal to the public for information on the suspected paedophile.
On the day the pictures were released, Neil abruptly left the school where he was teaching in South Korea. He arrived at Bangkok airport where Thai immigration authorities photographed him, with his head shaved and wearing glasses, setting off a nationwide search.
Police in Bangkok issued an arrest warrant for Mr Neil after a Thai teenager approached them claiming the teacher had abused him several years ago.
Neil lived in Thailand, where he was known as Vico, on several occasions between 2002 and 2004 when the alleged images of him abusing the boys were uploaded.
Interpol followed up with a "red notice" international wanted persons warrant, a precursor to extradition proceedings.
Neil was tracked to the house of a 25-year-old Thai transvestite nicknamed Ohm in Nakhon Ratchasima after a trace was put on his mobile. He was arrested yesterday morning, but said nothing except to confirm his name and ask for a lawyer. "The suspect was quiet," said Lieutenant General Pongsapat Pongcharoen, of the Thai police. "He wasn't agitated. He didn't say anything at all."
Neil acknowledged his name and nationality, but would not say whether he was the man pictured in more than 200 photographs having sex with boys as young as six in Cambodia, Vietnam and Thailand, according to police.
Neil is suspected of abusing at least 12 youngsters - at least one said to be under 10 years old.
On 11 October, footage from a security camera at Bangkok airport recorded Neil's entry into Thailand from South Korea, where he had been working as an English teacher.
After hundreds of responses to its appeal for help, Interpol named him as a suspect earlier this week.
"The fact that we went to the public was the breakthrough," Interpol detective Mick Moran told AFP news agency.
"We are absolutely delighted that this guy has been arrested."
Neil, from British Columbia, has been teaching at schools in Thailand, South Korea and Vietnam since 2000.
Officers now believe the Canadian might have abused boys in all those places.
He could also be charged in Canada, which has laws allowing for the prosecution of its nationals for child-sex crimes committed abroad.
It later transpired that Neil had been employed by the Canadian military to counsel teenagers on moral issues.
Officials with the Canadian department of National Defence confirmed that Neil had been hired by the Canadian military in the summer of 1997 as a civilian chaplain at HMCS Fort Qu'Appelle, a sea cadet training camp at Fort San.
Lieutenant Carole Brown told the Saskatchewan News Network that Neil was employed at HMCS Acadia at Shearwater, Nova Scotia, during the summers of 1998 and 1999, as well as at the CFB Greenwood air cadet summer training centre in 2000. His duties included spiritual advice for children aged 12 to 18.
Anne Kully, principal of Saint Patrick's School in Maple Ridge, British Columbia, said that in 2000 and 2001 Mr Neil volunteered at the school as part of his training at Christ of the King seminary, where he was studying to become a priest.