U.S. officials said al-Libbi was the third most important al-Qaida figure after Saudi exile Osama bin Laden and Ayman al-Zawahiri, the former head of the Egyptian Islamic Jihad.
According to Pakistani Information Minister Sheikh Rashid Ahmed, the fugitive was captured Tuesday. Al-Libbi, a native of Libya, was taken during a raid in South Waziristan, an area sympathetic to al-Qaida, according to Ahmed.
Al-Libbi reportedly succeeded Khalid Sheikh Mohammed as head of al-Qaida operations in the country; Mohammed was arrested in March 2003 in the nearby town of Rawlapindi.
In Washington, President Bush hailed the development, saying it "represents a critical victory in the war on terror."
During an appearance to talk about Social Security, the president called al-Libbi "a major facilitator and a chief planner" for bin Laden's al-Qaida terror network and said that his arrest "removes a dangerous enemy who is a direct threat to America and for those who love freedom."
American officials said that human intelligence had "played a critical role" in al-Libbi's arrest, according to The New York Times. It was not clear whether he would remain in Pakistani custody or be given to the CIA, which is holding Mohammed and other senior al-Qaida leaders at undisclosed locations around the world.
The Pakistani government blames al-Libbi for two separate attempts on Musharraf's life in December of 2003. In the first, a bomb ripped apart a bridge just moments after the president's motorcade passed through. No one was hurt in that incident, but shortly after, two suicide bombers attacked the president's car killing nearly 17 people, mostly police officers.
Al-Libbi's alleged accomplice in the assassination attempts was Pakistani militant Amjad Hussain Farooqi, who is also implicated in the murder of the Wall Street Journal reporter Daniel Pearl, according to the Times. Farooqi was killed last September in a gun battle with police in southern Pakistan.
Pakistan had offered a reward of $340,000 for information leading to al-Libbi's arrest. It was not immediately known if anyone would receive the reward.