Traynor, 62, fled Ireland following following the murder of journalist Veronica Guerin in 1996.
Traynor was Ms Guerin's main underworld contact and has been on the run from British authorities for 18 years after failing to return to custody in 1992 where he was serving seven years for fraud.
It is understood he was arrested in Amstelveen, near Amsterdam, in a joint operation between the Dutch and British police.
Traynor was an associate of Martin Cahill, also known as "The General" and was also close to John Gilligan.
John Gilligan was cleared of the murder of journalist Ms Veronica Guerin in 2001, was jailed by the Special Criminal Court for 28 years for importing cannabis resin. This is the longest sentence ever handed down in the State for drugs offences.
Traynor was involved in a wide variety of criminal endeavours, from robbery to drugs, embezzlement and prostitution. He was the second in command and main adviser of the drug-smuggling gang which was broken up by the Garda investigation into the Guerin murder.
He also had contacts with the Irish National Liberation Army (INLA).
