Husam Dofsh was arrested in Hebron city, an Israeli defence official told Xinhua.
The manhunt continues for the two prime suspects from the Hamas movement, Marwan Kawasmeh and Amar Abu-Isa.
Israeli Security Service Shin Bet said it was investigating Dofsh's involvement in the killings.
Eyal Yifrach (19), Gil-Ad Sha'ar (16) and Naftali Frankel (16) were kidnapped from Hebron in West Bank June 12.
Last week, they were found dead near Hebron and brought to rest in a funeral attended by tens of thousands of Israelis.
Since the abduction, more than 420 Palestinian suspects have been arrested and four Palestinians killed in clashes with Israeli security forces.