Gabriel Campos Martinez, 38, was arrested in San Antonio, Texas on Sunday, Los Angeles police said. He is being held without bail and is awaiting extradition proceedings.
The head of the victim, 66-year-old Hervey Medellin, was found in a plastic bag by two hikers in Bronson Canyon near the Hollywood sign in January 2012. The following day, detectives using search dogs found two hands and two feet in a shallow grave nearby.
Police say the cause of death was asphyxiation. Authorities used fingerprints from Medellin's severed hands to identify him.
Medellin was a former Mexicana Airlines employee. He and the suspect had lived together in a third-floor apartment in Hollywood. Police say the suspect had relocated and re-established in Texas.
"Detectives have had him as a person of interest since the onslaught of the investigation," said LAPD Chief Charlie Beck. "It was and is a very difficult case and we would have never made this case without the finest detectives in the world, the robbery homicide division, and the direct assistance and partnership of the District Attorney's Office."