The victim, Antonietta Gisonna, aged 52 from Naples, was beheaded at her home on Saturday, before her severed head was tossed into the building's internal courtyard.
Neighbours called the police after hearing screams and a loud argument – but when the police arrived, the scene they found was horrifying.
The woman's decapitated body was found in the hallway of her home and her head had been thrown out of the window.
Police chief Biagio Storniolo told reporters at a press conference: “It was horrific. There was blood everywhere.”
A 20-year-old Ecuadorian man, found kneeling over the body, has been arrested.
He offered brief resistance but was later sedated and taken to hospital. La Stampa reported that the man had said nothing to police and will be questioned later this week.
Police said that the motive for the crime is still unknown, but could involve drugs or prostitution.
The victim had been investigated for dealing drugs with her 20-year-old Moroccan boyfriend in 2013.
Neighbours reported not having seen the Ecuadorian suspect at the home of the woman before.