Tomas Yarrington, who led the northern state of Tamaulipas from 1999-2005 and is being sought by the United States for alleged drug money laundering, was detained on Sunday.
The Attorney General's Office last December offered a reward of 15 million pesos ($803,000) for the capture of Yarrington, who as governor was thought to have links with powerful cartels operating in the state that borders the United States.
His arrest was the result of a warrant issued by a Tamaulipas criminal court, the office said in a statement.
The Mexican prosecutor's office did not say where in Italy Yarrington was detained, but local media reports there indicated it was in Florence.
After completing his term as governor, Yarrington had presidential aspirations for 2006. But he did not prevail in the primary of his then party, the Institutional Revolutionary Party (PRI).