The coast guard said the captain had refused to stop for an inspection near the south-westerly Goto Islands.
The Japanese authorities said the vessel then tried to flee, and was stopped only after a four and a half hour chase ended with a collision.
The arrest of another Chinese skipper last year caused a high-level spat between the two countries.
The latest incident took place about 100 miles (60km) from the Goto Islands on Sunday. The islands lie off the west coast of Nagasaki prefecture in the southern island of Kyushu.
The captain, named as Zhang Tianxiong, 47, reportedly faces up to six months in jail if convicted.
Japan’s chief cabinet secretary Osamu Fujimura played down any possible ramifications of the arrest, saying it was a “regular case” to be dealt with according to domestic law.
In September 2010, a similar incident triggered a stand-off. Beijing suspended contact and even appeared to block the exports of rare earths, vital to Japan’s car and electronics industries.
Beijing suspended ministerial-level meetings and, according to trading companies in Tokyo, blocked exports of rare earths, vital for high-tech manufacturing in Japan.
The BBC’s Roland Buerk in Tokyo says there is hope though that the latest arrest will be resolved without rancour.
The latest incident took place well within Japanese territorial waters. Last year’s took place near the Senkaku Islands, which Japan controls but China claims and calls the Diaoyu Islands. (BBC)