A French judicial official said Mr Sarkozy was in custody in the Paris suburb of Nanterre.
French media reports said Mr Sarkozy was being questioned as part of an investigation into the financing of his 2007 presidential campaign.
The case centres around whether Mr Sarkozy and his lawyer were kept informed of insider information on the investigation by a friendly magistrate.
The ex-president and his lawyer have denied wrongdoing.
Mr Sarkozy's lawyer Thierry Herzog was also held for questioning yesterday.
Investigators are basing suspicions at least in part on tapped phone conversations that the former president has denounced and compared to secret police actions in the old East Germany.
Allies from his conservative UMP party - which has been in leadership crisis because of questions over spending during Mr Sarkozy's 2012 presidential campaign - jumped to the former president's defence.
Lawmaker Christian Estrosi said: "They have never imposed such treatment on a former president, with such a surge of hate."
The Socialist government has tried to stay above the fray over Mr Sarkozy.