Joanna Yeates' landlord, Christopher Jeffries, was today arrested on suspicion of murdering the landscape architect, according to police sources.
Police arrested Jeffries at an address in Canynge Road, Clifton, Bristol - the road where Miss Yeates lived - at 7am today and took him into custody for questioning over the 25-year-old's death.
An Avon and Somerset Police spokesman said: "Just after 7am this morning, police attended an address in Canynge Road and arrested a 65-year-old man on suspicion of murder.
"He has been taken into custody at a police station within the Avon and Somerset force area and detained for questioning.
"Detectives investigating Joanna's murder are continuing to carry out forensic examinations, and are also continuing to appeal for anyone with any information that can help the enquiry to call the Operation Braid incident room on 0845 456 7000 or the independent charity Crimestoppers on 0800 555 111."
Ms Yeates' body was discovered on Christmas Day, eight days after she disappeared. She had been strangled.
Yesterday, police released CCTV of Miss Yeates buying two bottles of cider from an off-licence as she walked home on December 17 - the night she was last seen alive.
The footage, which shows her smiling as she entered the off-licence, was revealed as Crimestoppers announced it is offering a £10,000 reward for information which helps catch her killer.
Wearing a white winter jacket and carrying a black bag, she looked carefree as she strolled into the shop on Regent Street.
Forensic officers have taken away bags of evidence from Miss Yeates's flat and the blue front door for further tests.
They were also working in Longwood Lane in Failand, North Somerset, where her snow-covered body was found on Christmas morning by a couple walking their dogs.
Jefferies, who lived above Ms Yeates in another flat, reportedly told police he saw three people, one of whom he believed was Ms Yeates, leaving the Victorian block of flats.
He said he spotted the trio shortly after 9pm on December 17, not long after Miss Yeates arrived home alone, as he parked his car in the street.
Jefferies reported the sighting to police and they confirmed they are examining the evidence.
Speaking outside his home yesterday, Mr Jefferies denied he had told police he saw Miss Yeates leaving with two unidentified people.
"It is a serious distortion of what I said to the police and I have no further comment to make as that, no doubt, will be distorted," he said.
Earlier, he told Sky News: "I made some comment which was very, very, very much vaguer than that.
"Anything that I have said I have said to the police and I'm not prepared to make any comments to the media."
He added: "I definitely cannot say that I saw Joanna Yeates that evening. No."
But his neighbour Liz Lowman, who lives on the opposite side of the road from Miss Yeates's flat, said yesterday that Mr Jefferies had told her three people were coming out of a communal entrance to the mansion house.
"These people were leaving through the communal entrance," she said.
"Unfortunately, we didn't hear or see anything."