Authorities said he was captured as he traveled with aides in a convoy in Libya's southern desert.
Al-Islam was the only member of the Gadhafi family to remain at large.
He is wanted by the International Criminal Court for alleged crimes against humanity committed during the uprising.
Luis Moreno Ocampo, a prosecutor for the ICC, said he will travel to Libya next week for talks with the country's transitional government on where Al-Islam will be tried.
Al-Islam, Gadhafi's second son, went underground as Tripoli fell to revolutionary forces in late August and his whereabouts remained unknown even after Gadhafi was captured and killed by revolutionary forces on Oct. 20.
The Associated Press contributed to this report.