He was taken yesterday from his home in central London and questioned at an unnamed police station. When they announced the arrest, officers indicated they did not consider the man a likely suspect for the shooting.
The development comes a month after Ms Dando, 37, was shot dead on the doorstep of her London home. Police say there is no clear motive for the murder though they believe a former acquaintance or a stalker are the most likely suspects.
The prime suspect is a well-dressed man seen leaving Ms Dando's home in Fulham moments after she was shot. He was later spotted sweating heavily while boarding a bus. Police believe he had at least one accomplice.
Despite many sightings of the man, and of a possible accomplice driving a blue Range Rover, police have had no apparent breaks. Earlier this week a murder review team was brought in to look into the handling of the hunt.
In a separate development Sir Cliff Richard has agreed to perform in a special tribute concert in memory of Ms Dando. The veteran performer has confirmed he will sing at the fund-raising event for the Weston Hospicecare charity in Weston-super-Mare, of which the presenter was patron.
In a letter printed in The Weston and Somerset Mercury, the newspaper where Ms Dando was a trainee reporter, Sir Cliff wrote: "The work which Jill supported must go on, if possible with renewed vigour and commitment."