Sam Koim, the head of PNG’s corruption busting Taskforce Sweep, confirmed to ABC correspondent Liam Cochrane that his unit had served an arrest warrant on Peter O'Neill.
The action relates to millions of dollars of alleged illegal payments from the government to a law firm led by Paul Paraka.
A letter signed by Mr O'Neill which seemed to authorise some of the payments was produced previously. Mr O'Neill said at the time that the letter was a forgery.
The ABC reports that the prime minister is expected to arrive at the police fraud office later today for questioning.