Ansar Shah, 36, was stabbed to death in a car park on Ayr's seafront on October 4, 1993.
Police Scotland said the suspect had been arrested on a European arrest warrant in Frankfurt, Germany.
Proceedings to bring the arrested man back to Scottish jurisdiction are expected to begin "in due course", officers said.
Det Ch Insp Mark Bell, from Police Scotland's homicide governance review, said: "Police Scotland is committed to pursuing those persons who are allegedly responsible for the gravest of crimes.
"Time and location is no barrier to the efforts and determination of our staff and partners to pursue justice for victims and their loved ones.
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