Police said Thursday they launched a criminal probe against priest Sime Nimac after the Church accused him of illegally selling church land for €1.3 million ($1.7 million) and taking the sale money.
They said Nimac was arrested on Wednesday in the capital of Zagreb.
The case has drawn much public attention in Croatia.
Local media have reported that Nimac also ran off with a married woman who had allegedly helped him draw the money from the bank.
Jutarnji List newspaper said Nimac denied the allegations against him in a phone interview.