Officers detained a 33-year-old man in a street in the capital on Thursday afternoon and he is being held at a central London police station.
He is being questioned on suspicion of the commission, preparation and instigation of terrorist acts under section 41 of the Terrorism Act 2000.
Police have been searching two houses.
Officers said his arrest was pre-planned and was as a result of an investigation by the MPS Counter Terrorism Command supported by the Wales Extremism and Counter Terrorism Unit.
There was police activity in the Grangetown and Riverside areas of Cardiff on Thursday afternoon but Metropolitan Police refused to confirm if it was linked to the arrest.
The BBC understands the arrest is related to alleged Islamist terrorism.
The arrest of a man on suspicion of terrorism offences in Cardiff relates to a possible attack in the UK, police have indicated.