The man, said to be a member of the evil group, is being held on suspicion of planning terror crimes.
Mutar Muthanna Majid, 25, was arrested on Thursday afternoon after police raided the refugee housing unit in Boliden, Sweden.
It is thought that he had been in the area for as many as three weeks and fears have been raised that he could have snuck into the country as a refugee.
Local sources said the man had been seen on public transport for nearly a month before the arrest.
A Swedish official said: "The arrest took place in a calm manner and an interrogation with the person is planned."
It came a day after authorities launched a huge hunt for a suspected terrorist in Paris.
A witness said the alleged fugitive had tried to hide on a balcony but was eventually caught and detained by police.
Swedish Prime Minister Stefan Löfven said: "I am impressed by the speed with which it has found and arrested the suspect."
France: 8 people in custody after raid on Paris terror cell
The terror threat in Sweden is currently at 'four', one level below the highest alert, and the highest it has ever been.
On Wednesday morning, French authorities swooped on Saint Denis in a raid that led Paris attack mastermind Abdelhamid Abaaoud dead.
A woman, believed to be the the cousin of Abaaoud, was also killed after she blew herself up with a suicide belt.
Seven people were also arrested as scores of heavily armed police and soldiers flooded into the northern Parisian suburb.
Authorities are still looking for Salah Abdeslam, the apparent logistics manager behind the atrocities in the French capital.
He is said to be using the name Yassine Baghli.