Seevaratnam Prabaharan, alias Pulidevan, who is attached to the Tigers' peace secretariat, has been placed under arrest on the direct orders of the Tiger supremo, Velupillai Prabhakaran, the statement said.
"The arrest has been made as a result of a worsening internal dispute among key LTTE (Liberation Tigers of Tamil Eelam) figures," the ministry said.
It did not say when Pulidevan was placed under house arrest, but said its information was based on "defence intelligence authorities."
"An armed gang led by LTTE's intelligence wing leader Pottu Amman had made the arrest few days back," the statement said.
It added that Pulidevan was part of the LTTE delegation that took part in several rounds of peace talks with the Sri Lankan government during the Norwegian-brokered six-year truce that ended in January.
There was no immediate reaction from the LTTE to the government's statement.
In May, "Brigadier" Balraj, a commander of the LTTE's conventional fighting unit that has