The man was arrested in northeast China's Shenyang city for "illegal trading" in recent days, said foreign ministry spokesman Liu Jianchao.
Liu said the man had posted messages on the Internet since 2004 under the name of his China-based company to provide organ transplants for Japanese patients.
"This has violated the Ministry of Health's regulations which ban the trading of organs... so he was arrested," Liu told reporters, adding that others involved in the case have also been detained.
Chinese police also confirmed the arrest.
The Japanese man, believed to be Hiroyuki Nagase, set up the "China International Organ Transplant Support Centre" and helped to arrange organ transplants for more than 200 Japanese patients in hospitals in Liaoning and Shanghai, Japan's Jiji press said.
Before his arrest, he told Jiji there was a shortage of organ donors worldwide and China was the last resort for Japanese who failed to find donors locally.
He said 90 percent of Chinese donors were death-row convicts and Chinese hospitals tended to give preferential treatment to foreigners including Japanese because "they can earn hard currency."
But he denied that his company was engaged in the sales of organs, saying that it did not directly deal with organ providers.
Amid ongoing claims that taking body parts from executed prisoners is common, China in May formally banned trading in human organs, prohibiting all organisations and individuals from trading them.
Last week, state media also reported that China will no longer transplant organs from executed prisoners except for their immediate relatives.