Shivakumar was arrested after questioning for the fourth time, a senior ED official told . He will be presented at a city court where the ED is expected to seek a five-day remand.
Soon after his arrest, he was taken for medical examination at the Ram Manohar Lohia Hospital. Following his arrest, many party supporters gathered outside the ED headquarters and raised slogans against the investigating agency and the BJP-led NDA government.
While being taken for the medical test, Shivakumar told reporters, "I am not coward and I will face it. It's a completely political case."
In a series of tweets, Shivakumar also hit out at the BJP government and said the Income Tax and the ED cases against him were "politically motivated".
"I congratulate my BJP friends for finally being successful in their mission of arresting me. The IT and ED cases against me are politically motivated and I am a victim of BJP's politics of vengeance and vendetta," he said in a tweet.
Shivakumar also told his party supporters to remain calm and not get disheartened.
Meanwhile, an ED official said the Congress leader was arrested because he was evasive and non-cooperative with the agency on questions related to his investments, shell companies and properties. The agency has grilled Shivakumar for over 29 hours since Friday.
On several occasions, he tried to delay the interrogation by not replying to questions on links with persons in Delhi's Chandni Chowk area to whom bags full of cash were sent, the official said.
The Congress leader remained evasive about the source of money recovered from his residence in Delhi and premises in Bengaluru in 2017 by the Income Tax Department.
Slamming the BJP government over Shivakumar's arrest, Congress General Secretary K.C. Venugopal said it was a clear case of "political vendetta" by the BJP-led Central government for standing against "horse trading" of the saffron party.
"The arrest of Shivakumar is a clear case of political vendetta by the fascist BJP government at the Centre. After P. Chidambaram, yet another leader is facing vengeance for standing up against the horse trading and petty politics of the BJP."
Taking a dig at the investigative agencies for acting as a puppet of the government, the Congress Karnataka in-charge said, "By these actions ED and CBI have proved to be the puppet agents of the government at the Centre. A wrong trend has been set by the Modi government to harass and hunt down political opponents with fabricated allegations."
Venugopal said although there are "well proved" and "explicit cases" of black money transactions and money laundering in the alleged political horse trading in Karnataka by the BJP leaders, the central investigating agencies have not registered any cases against BJP leaders.
He said Shivakumar being a strong and obedient Congress leader in Karnataka, was always a target of the BJP.
"Although he unhesitatingly appeared for the questioning and cooperated with the investigations, the ED is seemingly obeying the command from their masters," he said.
Congress spokesperson Randeep Singh Surjewala also slammed the BJP government and described the arrest of party leader as a "diversionary tactic" from the real issues.
"India's economy is in doldrums. Rupee has become the worst performing currency. Grievous economic emergency is prevailing in this country," he said.
"To put a lid over all this and to draw attention away from their own misdeeds, the BJP government is taking false action against Congress leaders. The illegal arrest of Shivakumar is one more example of such instance. Shivakumar is innocent and there is not an iota of evidence against him."
Shivakumar was instrumental in keeping Gujarat Congress MLAs from being poached in 2017 ahead of the Rajya Sabha election. He had arranged for their stay at a luxury resort in Karnataka. Ahmed Patel, the Congress candidate, won the vote narrowly.
Shivakumar also shepherded MLAs in Karnataka during the coalition government of the Janata Dal-Secular and the Congress and held talks with the rebel MLAs.
He first deposed before the ED on Friday after the Karnataka High Court rejected his plea for interim protection from arrest by the financial probe agency.
He was on the radar of the I-T Department and the ED since demonetisation in 2016. An I-T search at his New Delhi flat on August 2, 2017 led to seizure of Rs 8.59 crore in unaccounted cash.
The I-T Department lodged cases against him and his four associates under sections 277 and 278 of the I-T Act, 1961 and sections 120(B), 193 and 199 of the Indian Penal Code (IPC).
Based on the I-T Department charge sheet, the ED registered a money laundering case against Shivakumar, Haumanthaiah, an employee at Karnataka Bhavan in New Delhi, and others.
( With inputs from IANS )