Novak Djukic, 52, was arrested near the northern city of Banja Luka and will face war crimes charges, prosecutors said.
A single shell was fired from a Serb position on Mount Ozren on May 25, 1995, killing 71 and wounding more than 120 people in Tuzla's main square.
Most of the victims were young people, the youngest a 3-year-old boy. It was considered to be one of the worst massacres of the 1992-1995 Bosnian war.
At the time of the shelling, Djukic was an officer of the Bosnian Serb army and he is suspected of having committed a criminal offense of war crimes against a civilian population, prosecutors said.