The suspect was identified by Holder as Faisal Shahzad. The New York Times said the man lives in neighbouring Connecticut and recently returned from a trip to Pakistan.
Holder said the suspect was arrested at John F Kennedy International Airport in New York as he tried to take a flight to Dubai. Authorities in New York said he would appear in Manhattan Federal Court later Tuesday.
"It's clear that the intent behind this terrorist act was to kill Americans," Holder said at an early morning news conference. "We continue to gather leads in this investigation, and it's important that the American people remain vigilant."
Sources said the arrested man is believed to be the buyer of the 1993 Nissan sport utility vehicle used to carry the crude bomb made of fuel and fireworks into Times Square as it was packed with people on a warm Saturday evening.
For New Yorkers who bore the brunt of the September 11 attacks by al Qaeda militants in 2001, the scare was a reminder that their city of 8 million people is under constant threat.
Law enforcement sources told Reuters that Saturday's attempted attack may have involved more than one person and could have international ties.
The hunt for the suspects has now been taken over by the Joint Terrorism Task Force, led by the Justice Department, as investigators pore over surveillance camera footage, the Pathfinder and the bomb parts for clues.
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