A judicial official confirmed yesterday's reports that the 59-year-old was detained for questioning at the headquarters of the judicial police in the Paris suburb of Nanterre.
BFM television said last night that Mr Sarkozy was transferred to an investigating judge, who could charge him, name him as a witness or release him.
French media reports say Mr Sarkozy is being questioned in an investigation linked to financing for his 2007 presidential campaign, notably allegations that late Libyan leader Muammar Gaddafi gave him illegal campaign donations.
He denies any wrongdoing.
The French daily Le Monde says the questioning centres around whether Mr Sarkozy and his lawyer, Thierry Herzog, were kept informed about the investigation by a friendly magistrate, Gilbert Azibert.
Mr Herzog was released but handed preliminary charges last night, his lawyer Paul-Albert Iweins told reporters. He insisted there was no proof of wrongdoing.
Investigators are basing suspicions at least in part on taped phone conversations between Mr Sarkozy and his lawyer. The taping raised questions about the limits between investigative needs and individual privacy, particularly lawyer-client privilege. Mr Sarkozy has compared the situation to actions by the secret police in the old East Germany.
Allies from Mr Sarkozy's conservative UMP party - which has been in a leadership crisis - jumped to the former president's defence.
“They have never imposed such treatment on a former president, with such a surge of hate,” spokesman Christian Estrosi tweeted.
Former president Jacques Chirac was convicted in a corruption case in 2011 after he left office, but when he was questioned he was not held in police custody.
The Socialist government tried to stay above the fray.
“Justice officials are investigating, they should carry out the task to the end. Nicolas Sarkozy is a citizen answerable to justice like any other,” government spokesman Stephane Le Foll said on i-Tele television.
Additional reporting by the Press Association
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