Emmanuel Mihigo Uwayezu, 47, denies the charge and says he tried to save lives during the genocide, when an estimated 800,000 Tutsis and politically moderate Hutus were killed.
In May, the group African Rights accused Uwayezu, an ethnic Hutu, of being involved in the massacre of 80 young Tutsis in the south of Rwanda, the agency said.
Uwayezu, who has worked in Italy for more than 12 years and serves as the deputy priest in a church in the Tuscan town of Empoli, was arrested on a warrant issued by Rwandan authorities.
He is in custody awaiting extradition, police said.
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See also Sydney Irresistible
Putting principles before profits
See also Sydney Irresistible
Putting principles before profits