Serbian President Boris Tadic is expected to announce the arrest at a press
conference later on Wednesday.
Hadzic is the last of the 161 people indicted by The Hague-based International Criminal Tribunal for the former Yugoslavia (ICTY).
He faces 14 counts of war crimes and crimes against humanity including persecution, extermination, torture, deportation and wanton destruction for his involvement in atrocities committed by Serb troops in Croatia during the 1991-1995 war.
His arrest comes less than two months after Serbian authorities finally captured wartime Bosnian Serb commander Ratko Mladic.
Hadzic is wanted on charges that Croatian Serb troops under his command massacred 250 Croats and other non-Serbs after the city fell to Serbian troops following an almost three-month siege in November 1991.