Prosecutors in the southwestern state of Baden-Wuerttemberg said the man was believed to have worked at the camp between autumn 1941 and its closure in 1945.
The man, who was detained at his home, "appeared before a judge and was taken into custody", the prosecutor's office in the state capital Stuttgart said in a statement.
Authorities declined to release the suspect's name but media reports indicated it was Hans Lipschis, who figures among the Simon Wiesenthal Centre's most-wanted Nazis.
Lipschis has been living in the Baden-Wuerttemberg town of Aalen and reportedly told authorities that he worked as a cook, not a guard, in the camp in occupied Poland.
The Simon Wiesenthal Centre, in its 2013 report, lists him as its fourth most-wanted Nazi, saying he served in the SS-Totenkopf Sturmbann (Death's Head Battalion) from 1941 until 1945 at Auschwitz and "participated in the mass murder and persecution of innocent civilians, primarily Jews".
More than one million people, mostly European Jews, perished at Auschwitz-Birkenau, operated by Nazi Germany in occupied Poland from 1940 until it was liberated by the Soviet Red Army on January 27, 1945.
In that case, the court ruled that any role at a death camp amounted to accessory to murder, widening culpability from those found to have personally ordered or committed murders and atrocities.
Demjanjuk was sentenced to five years' prison for complicity in some 28,000 murders. He died at a nursing home last year while free awaiting an appeal.
Lipschis is among 50 surviving Auschwitz staff who are being investigated in Germany under the broadened culpability rules.
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