The fugitive son of the late Libyan leader was seized on Saturday in southern Libya with two aides, who were trying to smuggle him out to neighbouring Niger.
His arrest after months on the run sparked a wave of celebrations among jubilant citizens across newly liberated Libya.
Libya's the National Transitional Council (NTC) has given assurances that the 39-year-old will be tried in accordance with international guidelines amid fears he would meet the same fate as his father.
International Criminal Court (ICC) prosecutor Luis Moreno Ocampo will travel to Tripoli in the next few days to discuss arrangements for the trial, including where it will be staged.
Prime Minister David Cameron has offered support to the ICC and the NTC to ensure Saif al Islam faces justice for his role in the "barbaric" reign of terror.
Mr Cameron said: "The Libyan government's announcement of Saif al Islam's arrest shows we are near the end of the final chapter of the Gaddafi regime.
"It is a great achievement for the Libyan people and must now become a victory for international justice too.
"He could have contributed to a more open and decent future for his country, but instead chose to lead a bloody and barbaric campaign against his own people. The fate of the Gaddafis should act as a warning to brutal dictators everywhere.
"Britain will offer every assistance to the Libyan government and the International Criminal Court to bring him to face full accountability and justice for what he has done," he said.
"The Libyan government has told us again today that he will receive a trial in line with international standards, and it is important that this happens."
Gaddafi's heir-apparent was caught by a militia force in the southern Libyan town of Obari and was then flown to Zintan in the north.
Talks are believed to be under way about transferring Saif al Islam to Tripoli where Libyan leaders hope to put him on trial.
Foreign Secretary William Hague said: "Saif al Islam no longer poses a threat to peace and security in Libya. His arrest will allow the Libyan people to move on to the challenge of rebuilding their country.
"I look forward to the announcement of a new transitional government, and to working closely with it to achieve their goal of a democratic and prosperous Libya."
Saif al Islam was a key member of his father's inner circle and proved to be following in his footsteps in February he told Libyans on state-run television that "rivers of blood" would flow with "thousands" of deaths if the uprising did not stop.
His PhD from the London School of Economics was shrouded in controversy, even prompting the British ambassador to the US to deny claims that he helped the dictator's son with his thesis.
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