Mr Green, who is the shadow immigration minister, was arrested at his home in Kent by counter-terrorism police officers.
The arrest follows a series of leaks to the Conservatives about Government policy, including a sensitive memorandum from the Home Office's most senior official on crime figures earlier this month.
David Cameron, the Conservative leader, is said to be "extremely angry" about the arrest and has privately accused the Government of "Stalinesque" behaviour.
Mr Green is understood to have been arrested at lunchtime today and is still in custody. He has not been charged.
Green has been arrested after obtaining leaked Whitehall documents. Police searched his family home and his office in the House of Commons.
He was arrested for "aiding and abetting misconduct in public office".
It is claimed that nine counter-terrorism officers were involved in the arrest