The 47-year-old man, who was not identified, was arrested on Wednesday in the eastern Dutch city of Arnhem and appeared in a Rotterdam court on Friday where he was provisionally released.
"The man is a former soldier whose case was extensively reported on last year in the media and on Facebook due to his involvement in the fight against the Islamic State," a statement said.
"Dutch law - apart from exceptional circumstances like self-defence - does not give citizens the right to use force and particularly not deadly force.
"Killing an IS fighter therefore could mean being prosecuted for murder," the statement said.
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The man is alleged to have fought in Syria alongside the Kurdish People's Protection Units (YPG), accused by Amnesty International last year of chasing citizens from their homes in northern Syria before razing them.
The prosecutor's office said there was an important difference between people who travel to Syria under their own steam to fight IS and the Dutch military, which is training fighters and carrying out bombing missions in neighbouring Iraq.
"The (Dutch) deployment and training takes place at the request of the Iraqi government and forms the legal basis for its presence there. It also applies to the deployment of Dutch F-16 fighters above Iraq," the statement said.
The Netherlands have been taking part in coalition operations in Iraq since October 2014 including using four F-16's to fly close air support missions for the Iraqi army.
A Dutch decision is expected this month on whether to join US-led air strikes in Syria.
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