A European arrest warrant was issued for Eneko Gogeaskoetxea Arronategui over an attempted assassination fourteen years ago.
Scotland Yard and Cambridgeshire Police said they raided a property in the university city this morning following an “intelligence-led” operation.
Eta, a militant group fighting for an independent Basque homeland, has been blamed for more than 800 deaths during its 42-year campaign in Spain.
The group has been linked with a string of assassination plots on Juan Carlos, who became king in 1975.
Arronategui, 44, believed to be a member of Eta, is due to appear before City of Westminster magistrates this afternoon for an extradition hearing.
Spanish authorities believe he attempted to assassinate King Juan Carlos in October 1997 before fleeing the country.
The plot focused on the official opening ceremony of the Guggenheim art museum in Bilbao on 13 October 1997, at which the King was presiding. Eta was believed to be planning a grenade attack and, when challenged, members of the group opened fire, killing a policeman.
A Scotland Yard spokesman said his arrest warrant states he is wanted for a string of offences, including participation in an armed gang, attempted assassination of the king, terrorism resulting in death, possession of weapons and theft.
Counter-terror detectives supported by local officers were searching a home and two business addresses in Cambridge.