Former PNG prime minister Peter O'Neill was arrested after arriving at the Jackson’s International Airport in Port Moresby from Brisbane on Saturday afternoon.
The Royal Papua New Guinea Constabulary said he is being questioned over his alleged role in the purchase of two generators from Israel that did not comply with the correct procurement and tender processes.
The Assistant Commissioner of Crimes, Hodges Ette, said "there is reasonable evidence for misappropriation, abuse of office and official corruption".
He said the allegations against Mr O'Neill include that he "directed the National Executive Council to convene and approved the payment of 50 million kina (A$21.92 million) for the generators after the purchase was made".
Mr O'Neill will be allowed bail after police questioning and is expected to undergo a 14-day quarantine period at his home as part of the COVID-19 regulations.
The allegations against Mr O'Neill relate to a purchase he made as prime minister in 2013. The transaction involved two 15-megawatt generators, which were bought from Israeli company, LR Group.
PNG's parliamentary opposition filed a police complaint about the transaction in 2014.
After seven years in the role, Mr O'Neill resigned as the country's prime minister in 2019, following a series of resignations from members of his government.
Police withdrew a warrant to arrest Mr O'Neill on corruption allegations in October last year, after he successfully challenged it in the courts.
