Hashem Abedi, born in 1997 in Britain, was arrested Tuesday evening in the city of Tripoli by Libyan intelligence services.
The arrest is the latest in a string of detentions following the deadly Monday attack by 22-year-old Salman Abedi, a British student dropout.
Security services believe the suspected bomber was likely to have had help from others in staging the attack that killed 22 people, including a girl aged just eight, and a police operation was launched to close on what is believed to be a network of accomplices.
On Wednesday, British police arrested a man near Manchester in connection with the terror attack, the deadliest in Britain since 2005, bringing the total number of people detained in the investigation to five.
"We have made an arrest in Wigan this afternoon in connection with the investigation into the horrific incident at Manchester Arena," police said in a statement.
"When arrested, the man was carrying a package which we are currently assessing."
British Prime Minister Theresa May on Tuesday placed the country on its highest level of terror alert, which means a new attack is believed to be imminent.
Soldiers were sent to assist armed police at strategic sites in what is the first deployment of troops on British streets since 2007.
The deployment is codenamed Operation Temperer and was formulated in November 2015 after the deadly Paris attacks. It allows up to 5,000 soldiers to be dispatched.
A nationwide minute of silence will be held at 10:00 a.m. on Thursday for the victims of the attack, a government statement said.
"The silence will be marked by all government buildings and other organisations may follow suit," said the statement on Wednesday, adding that flags would remain at half-mast until Thursday evening.
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