A senior police officer said Masarat Alam Bhat was arrested by a police party from a house in Wangund area of Srinagar during a raid.
"We have got him," the officer said. Bhat has now been shifted to an undisclosed location for questioning.
Masarat Alam Bhat, a close aide of Geelani, was the most wanted separatist leader who was eluding the security forces for over past four months.
He was released earlier in June in Srinagar after remaining under detention for two long years under the Public Safety Act.
During Geelani's detention, Bhat along with Dukhtarani Milat, chief of Asiya Andrabi, launched the 'Quit Kashmir campaign' in June when large scale protests and violence erupted in the wake of the killing of a 17-year old student Tufail Ahmad Mattoo after being hit by a teargas shell in Srinagar.
Masarat had two day's back released a CD wherein he had hailed Geelani for 'his steadfastness and integrity' urging 'people to continue to render support to him.'
Security forces have been conducting raids to nab Masarat Alam Bhat, general secretary of the Geelani led All Parties Hurriyat Conference group.
Bhat shot into prominence for his 'hawkish image' and his close association with Geelani.
Image: Masarat Alam Bhat
'We will win the war in Kashmir'
Hurriyat cancels protest march on army camps
Geelani detained in Srinagar; Omar to meet PM
Commission probes civilian deaths in Kashmir
Shutdown in Srinagar as Geelani calls for strike