However, Panamanian Security Minister Jose Raul Molino told The Associated Press in Panama City that he was unaware of Robert Seldon Lady's detention, and the press office of the National Police - which works with Interpol, the international police agency - said it had no information about the case.
The CIA said it had no immediate comment.
Lady, the former Milan CIA official, was sentenced by an Italian appeals court in Milan earlier this year in the extraordinary rendition case to nine years in prison after being tried in absentia in Italy for the kidnapping of the Muslim cleric.
The trials of Lady, 59, now retired from the CIA, and two other Americans in the case brought the first convictions anywhere in the world against agents involved in the agency's extraordinary rendition program, a practice alleged to have led to torture.
The ministry said it didn't immediately have details on when or where in Panama the detention of Lady, who was born in Honduras, took place. Minister Anna Maria Cancellieri, who reportedly signed the request for Lady's detention, was away on a visit to Lithuania.
Italy and Panama have no extradition treaty, Italian diplomats said, so being detained in Panama wouldn't necessarily result in Lady's return to Italy, which he left a few years after the abduction, early into the Italian investigation.
The terror suspect, Osama Moustafa Hassan Nasr, also known as Abu Omar, was abducted in February 2003, transferred to U.S. military bases, first in Italy, then in Germany, before being flown to Egypt.
The cleric alleged he was tortured in Egypt. He was later released.
The previous Italian government had said that extradition could only be sought for Lady, since it can only be requested for people who have been sentenced to more than four years in prison.
A 2006 amnesty in Italy shaves three years off all sentences meted out by Italian courts, meaning if Lady is brought back to Italy, he would face six years in prison.The lead Italian prosecutor on the case, Armando Spataro, said Interpol had issued a request for Lady's arrest, reflecting Italy's determination to have him extradited.
AP correspondents Juan Zamorano in Panama City and Adam Goldman in Washington contributed to this report.