Sascha Alessadro Bottcher, 23, was arrested Tuesday in the coastal town of Mtwapa following a countrywide alert, police spokesman Erick Kiraithe said.
The German is a Muslim convert who arrived in Kenya through the Moi international airport in Mombasa in September, Xinhua reported.
Bottcher's whereabouts had earlier remained unknown and authorities said they were apprehensive because he had written a will before leaving Germany, saying he was going to Somalia and would not return alive.