Police, who typically do not identify individuals under investigation, said in a statement they had arrested a 51-year-old former male newspaper editor on suspicion of "conspiring to collude with foreign countries or foreign forces to endanger national security."
Media group Next Digital, which published Apple Daily, did not immediately respond to a request for comment.
The popular tabloid of staunch Beijing critic Lai folded after several hundred police raided its headquarters on June 17 and froze key assets and bank accounts. It printed its last edition on June 24.
Police have said dozens of the paper's articles may have violated the city's China-imposed national security law, the first instance of authorities taking aim at media reports under the legislation.
Critics of the law, introduced in June 2020, say it has been used to muzzle dissent and erode fundamental freedoms, including those of the media, in the former British colony, which returned to Chinese rule in 1997.
Authorities have denied the erosion of rights and freedoms in Hong Kong, but have said acts that endanger China's national security cross a red line. Security officials have said law enforcement actions are based on evidence and have nothing to do with an individual's background or profession.