In a statement released on Saturday, the Afghan Interior Ministry announced the arrest of the suspect, who has been identified as Dan Fijord.
The statement added that police found the Briton in possession of 129 weapons as well as 148 communication devices without proper documents.
Afghan authorities ordered the immediate shutdown of Fijord’s private security firm, and are holding the British man for further investigation as to illegal arms transport.
The incident is the latest in a series of private security firms found to be involved in illegal activities in Afghanistan.
In January 2012, Afghan police arrested two British private security contractors and two Afghan colleagues after finding a cache of 30 AK-47 assault rifles in their vehicle at a Kabul checkpoint.
All the weapons had their serial numbers scratched off, and the two men had no permits for them.
President Hamid Karzai has said private security firms undermine the Afghan police and army forces, and flout Afghan laws and regulations.
The United States and its allies invaded Afghanistan in October 2001 as part of Washington’s so-called war on terror.
The offensive removed the Taliban from power, but insecurity continues to rise across the country, despite the presence of thousands of US-led troops.