Police said Naoko Kikuchi was being held on suspicion of murder after being arrested late Sunday in the city of Sagamihara, west of Tokyo, with local media reporting that officers swooped after a tip off.
Kikuchi, 40, was one of only two remaining members of the Aum Supreme Truth doomsday cult still at large, and was wanted for being part of the team responsible for producing the sarin nerve gas used in the subway attack.
"It is true that I was involved in producing sarin gas, but I did not know what we were making at that time," she was quoted as telling police.
Kikuchi's arrest leaves only one person, Katsuya Takahashi, 54, still at large on the police wanted list.
In the 17 years since the deadly attack, which injured thousands and caused havoc throughout Tokyo, Kikuchi had lived under an assumed identity, telling neighbours she worked as an accountant for a nursing care company, reports said.
Kikuchi was quoted by Jiji as telling police: "I have lived as Chizuko Sakurai, but I'm relieved that I don't have to run away anymore."
Police said she had been living with a 41-year-old man, who was not an Aum member and who stayed with her even after she revealed her true identity. He was also arrested early Monday accused of harbouring a criminal.
The 1995 subway attack was one of Japan's worst mass-murders, in which Nazi-developed sarin was released onto several packed rush-hour trains.
The coordinated attacks at stations near the centre of Japan's seat of government sowed panic throughout Tokyo's heaving metro system.
The Aum cult was also responsible for an attack on the city of Matsumoto in central Japan the year earlier, when sarin -- which Saddam Hussein deployed against the Kurds in northern Iraq -- killed eight people.
As well as those who died, thousands more were injured, some of them seriously and permanently by inhaling or coming into contact with the gas, which cripples the nervous system.
The end of Kikuchi's life on the run came just months after the surrender of Makoto Hirata, 47, a former Aum member who gave himself up to officers at a police station in central Tokyo minutes before midnight on New Year's Eve.
Aum guru Shoko Asahara preached a blend of Buddhist and Hindu dogma mixed with apocalyptic messages, and developed an obsession with sarin gas, becoming paranoid that his enemies would attack him with it.
According to prosecutors the cult wanted to disrupt police moves to crack down on them and at the same time enact Asahara's vision of an apocalyptic war.
Asahara was arrested at a commune near Mount Fuji two months after the attack on Tokyo and sentenced to hang, having been convicted of crimes resulting in multiple deaths. He remains on death row.
The guru used a mix of charisma, mysticism and raw power to commit one of Japan's most shocking crimes with his disciples, who included doctors and engineers educated at elite Japanese institutions.
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