The 49-year-old priest was arrested in Alassio in Liguria where he had recently moved from the town of Oulx in Turin, Corriere della Sera reported.
He was arrested along with three others, including two unemployed men aged 58 and 51 and a worker aged 51 in Torrecuso, Livorno and Rome.
The priest, who has not been named, allegedly purchased pornographic photos and videos of pre-adolescents through the paedophile network on the internet.
In some cases the material included children aged just a few years old, mostly from Asia.
The suspects allegedly met over the Russian social network Imgsrc.ru, where they published various photos before moving their communications to other web platforms.
In his communications with the other suspects, the priest allegedly posed as an American manager who was in Italy for work.
On Tuesday Italian police seized several computers, smartphones and devices considered “extremely interesting” to the investigation.
Police are also working to identify those responsible for the videos and the child victims.
The two-year-long investigation, which was conducted by Milan State Police, includes 29 Italians and 233 suspected paedophiles around the world.
Italian police have also shared information relating to suspects to 35 foreign countries through Interpol, the global law enforcement agency.