The head of the International Monetary Fund, Dominique Strauss-Kahn, has been charged by New York police over an alleged sex attack on a hotel maid.
Mr Strauss-Kahn, 62, was taken off an Air France plane at JFK airport just minutes before it left for Paris.
Police say the maid has now formally identified him in a line-up. He faces three charges which he denies.
The married former French finance minister is also considered a possible Socialist candidate for the presidency.
The BBC's Hugh Schofield, in Paris, says Mr Strauss-Kahn has been riding high in the polls and was seen as having a genuine chance of beating President Nicolas Sarkozy.
Martine Aubry, leader of France's Socialist Party, described news of his arrest as a "thunderbolt" which left her "astounded".
Mr Strauss-Kahn is expected to appear before a New York state court before 0100 local time on Monday (0500 GMT), despite reports of a delay as police apply for search warrants for further DNA evidence.
His lawyer, William Taylor, told Agence France-Presse news agency: "We saw him, he's doing OK. And we'll be in court with him later in the afternoon."
Mr Strauss-Kahn had been scheduled to meet German Chancellor Angela Merkel on Sunday, but that meeting has now been cancelled, reports say.
On Monday he had planned to attend a meeting of European Union finance ministers in Brussels on Monday to discuss the bailouts of Portugal and Greece.
Correspondents say his detention is likely to complicate ongoing efforts to stabilise the finances of struggling eurozone member states.
The Euro fell half a cent to $1.4063 when Asian markets opened on Monday - a six-week low against the dollar - reflecting concerns about the impact the arrest could have on the bailout talks.
In a brief statement posted online on Sunday, an IMF spokeswoman acknowledged Mr Strauss-Kahn's arrest and said the organisation would not comment on the case.
"The IMF remains fully functioning and operational," she added.
John Lipsky will act as IMF managing director in Mr Strauss-Kahn's absence.
Dominique Strauss-Kahn's arrest unfolded in dramatic fashion as he was poised to fly to Europe.
A spokesman for New York's Port Authority said they detained Mr Strauss-Kahn at JFK airport at the request of the New York Police Department (NYPD).
NYPD spokesman Paul Browne said Mr Strauss-Kahn had been charged with a criminal sexual act, attempted rape and unlawful imprisonment relating to an incident involving a 32-year-old woman.
Mr Browne said the allegations had been made by a 32-year-old woman who worked at the hotel, which has been identified as the Sofitel near Times Square. His accommodation there was described by the New York Times as a luxury suite costing $3,000 per night (£1,900).
"We received a call that a chambermaid in a hotel in midtown Manhattan had been sexually assaulted by the occupant of a luxury suite at that hotel, and that that individual had fled," Mr Browne told the BBC.
"The maid described being forcibly attacked, locked in the room and sexually assaulted," he said.
Speaking to Reuters, Mr Browne gave more details on the allegations against Mr Strauss-Kahn.
"She told detectives he came out of the bathroom naked, ran down a hallway to the [suite] foyer where she was, pulled her into a bedroom and began to sexually assault her, according to her account."
"She pulled away from him and he dragged her down a hallway into the bathroom where he engaged in a criminal sexual act, according to her account to detectives. He tried to lock her into the hotel room."
Mr Strauss-Kahn then made his way to the airport but left his mobile phone and other items behind, Mr Brown said.
"It looked like he got out of there in a hurry."
By the time police established that the occupant of the room was Mr Strauss-Kahn, the IMF chief was on board an Air France plane at John F Kennedy airport, about to depart for Paris.
"Our detectives requested of the airport authorities that they stop the plane from leaving, went to the airport and took him into custody," Mr Browne said.
"If our officers had been 10 minutes later he would have been in the air and on their way to France."
The woman has been treated at hospital for minor injuries, said Mr Browne.
'Error of judgement'
Mr Strauss-Kahn ran for the French Socialist Party's presidential candidacy in 2006 but lost to Segolene Royal.
He was appointed managing director of the IMF the following year.
Mr Strauss-Kahn has won praise for his stewardship of the IMF, which he has guided through difficult times including the recent world financial crisis.
But in 2008 he was investigated by the IMF board over his relationship with a female member of his staff.
The board ruled his actions "reflected a serious error of judgment" but that the relationship had been consensual. He apologised to IMF staff and his wife, French TV personality Anne Sinclair.
Mr Strauss-Kahn has not yet announced whether he intends to run in the 2012 French presidential elections, but had widely been expected to do so.