Police in Brazil say they have arrested Jose Dirceu, who served as chief of staff under then-President Luiz Inacio Lula da Silva from 2003 to 2005.
He is the most senior member of the governing Workers’ Party to be arrested as part of an investigation into alleged corruption at state-owned oil giant Petrobras.
Dirceu was already under house arrest.
He was sentenced in 2012 for his role in another corruption scandal known as the Mensalao.
He was found guilty of using public funds to pay opposition parties for support in Congress and sentenced to 10 years and 11 months.
After spending 18 months in prison, he was allowed to serve the rest of his sentence under house arrest.
Federal police officers arrested Dirceu, who is 69, at his home in the capital, Brasilia, on Monday morning, and took him into custody.
Federal prosecutor Carlos Fernando dos Santos Lima said Dirceu was one of the main instigators of a bribery scheme involving Petrobras.
He accused Dirceu of setting up the Petrobras kickback scheme along the same lines as he had done with the Mensalao corruption ring.
Speaking during a press conference, Mr Lima also said claimed Dirceu took bribes while in office.
He said he and his associates received a monthly payment of 200,000 reais ($58,000; £37,000) from Petrobras, although it was not clear how much of that money went to Dirceu directly.
The prosecutor said Dirceu continued to receive kickbacks even while he was in jail.
Dirceu’s lawyer has not yet commented on the fresh allegations.
The BBC’s Julia Carneiro in Rio de Janeiro says his arrest is another blow for the Workers’ Party, of which Dirceu is a founding member.
He is a former left-wing rebel who fought Brazil’s military government in the 1970s and was eventually sent into exile in Cuba.
He later became one of the closest political allies of Luiz Inacio Lula da Silva, who was president from 2003 to 2011.
Our correspondent says Jose Dirceu’s brother has also been arrested.
The investigation into corruption at Petrobras, dubbed Operation Car Wash, has been hugely damaging to the company.
In April, Petrobras said it had lost $2bn (£1.3bn) in costs related to corruption.
Dozens of lawmakers are being investigated in connection with the kickback scheme.
But President Dilma Rousseff, who chaired Petrobras when much of the corruption is believed to have taken place, has been cleared of involvement.