Lebanon's military court had ordered the arrest of Amer al-Fakhoury, a former member of the pro-Israel South Lebanon Army (SLA) militia and a senior warden in the notorious SLA-run Khiyam prison, the source said.
The country's General Security agency has been interrogating Fakhoury since Wednesday, the source added.
Another security source said the former SLA member had fled to the United States and had already been charged in absentia to 15 years in prison for collaborating with Israel.
Opened in 1984 in an Israeli-occupied part of southern Lebanon, the Khiyam prison was run by the Christian-dominated SLA.
Former inmates accuse Fakhoury of ordering the torture of thousands of detainees held there before Israeli forces withdrew from the area in 2000, ending their 22-year occupation of south Lebanon.
The former inmates joined nearly a hundred demonstrators on Thursday outside the Ministry of Justice in Beirut, where they condemned Fakhoury's return to Lebanon, calling him a "butcher."
"Not a single person held in Khiyam was spared physical and psychological torture," said Abbas Kabalan, who was detained there from 1987 to 1988.
"Fakhoury used to issue direct orders for the torture of inmates," Kabalan added, accusing him of also taking part in beatings.
Hilal Salman, another former inmate, blames Fakhoury for his brother's death.
"My father and mother and brother were all held in Khiyam," he told AFP at the protest.
"My brother was killed there in 1989 because of a gas bomb thrown at inmates on the orders of two prison heads, including Amer al-Fakhoury."
It was not immediately clear when Fakhoury entered the country, but the Lebanese Al-Akhbar daily said on Thursday that he arrived in Beirut's airport "days ago".
The newspaper claimed that all charges against Fakhoury had been "withdrawn", allowing him to leave the airport without being arrested.
Fakhoury left Lebanon in 1998, two years before the Israeli withdrawal.
Amnesty International and other human rights groups have often accused the SLA of torturing its prisoners.
Thousands of former SLA members have been tried in Lebanese military court for collaboration, and the powerful Shia Hezbollah movement has complained that sentences given to those convicted have been too light.
Many of the Khiyam personnel escaped to Europe or North America when Israel withdrew its forces from south Lebanon in 2000.
Thousands of SLA members and their families also fled to Israel for fear of reprisals by Hezbollah or of criminal charges.
Many have since returned to Lebanon.
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