Peter Chadwick, a 55-year-old naturalized American citizen, was located near Mexico City thanks to a tip after authorities offered a $100,000 reward, police said at a press conference Tuesday.
"Today is sweet. We apprehended a fugitive on America's Most Wanted List," Orange County district attorney Todd Spitzer said, adding: "Let's not forget it's bitter -- there's a victim, a loving wife of 21 years, a mother of three kids."
In 2012, Chadwick had called police and claimed that a handyman had killed his wife Quee Choo Lim before taking him hostage.
Chadwick said the murderer had forced him to drive to Mexico to dump the victim's body.
But US police officers who arrested Chadwick a few miles north of the border spotted scratch marks on his neck and traces of dried blood under his fingernails.
They discovered a crime scene at the couple's home and the suspect eventually drove them to a dumpster near San Diego, California, where he had concealed the body.
He allegedly strangled his wife in a dispute over the financial consequences of a possible divorce.
Chadwick, who made his fortune in real estate, was released in December 2012 on a $1 million bond and surrendered his US and British passports.
But in 2015 he fled, apparently drawing inspiration from books explaining how to change his identity and live on the run.
He tried to trick police by leaving behind clues indicating he had absconded to Canada, said David Singer of the federal US Marshals.
Following notice of the $100,000 reward, a tip helped track Chadwick to Mexico, where he had apparently been living the whole time, Singer said.
Chadwick was in possession of forged identity documents and lived in a large apartment in Puebla, a town near Mexico City popular with US expats.
Pre-trial proceedings are due to begin Wednesday. If convicted of murder, Chadwick could face a life sentence in state prison.