The charges against McKeeva Bush, 57, include misuse of a government credit card and importing explosive materials.
McKeeva Bush had been in power since his United Democratic Party (UDP) won general elections in 2009.
The British overseas territory is one of the world’s largest financial centres and a well-known tax haven.
On its website, the Royal Cayman Islands Police Force said: “The Premier of the Cayman Islands, McKeeva Bush (57), has been arrested and is currently detained in police custody in connection with a number of ongoing police investigations.”
McKeeva Bush previously held the post of leader of the islands’ government between November 2001 and May 2005.
A member of the legislative assembly representing West Bay, McKeeva Bush also holds the post of minister of finance, tourism and development.
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