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Over 60 people were injured in the incident that left behind a trail of bloody carnage at the Christmas market in Magdeburg, about 130 km from the capital Berlin.
The suspect is a doctor from Saudi Arabia who was living in the eastern state of Saxony-Anhalt, according to the regional premier Reiner Haseloff. He has been in Germany since 2006.
The doctor has not officially been named yet, but German media identified him as Taleb A, a psychiatrist. The authorities believe he was a lone attacker and the danger was over with his arrest.
He drove his black BMW at high speed into the crowded market around 1800 GMT. There was a trail of bloodied casualties, debris, and shattered glasses as the car went at least 400 metres across the market in the city's central town hall square, according to the cops.
In video footage of his arrest, cops were seen with their handguns trained at the bearded man with glasses as he lay on the ground next to the damaged BMW. "Lie down, hands on your back, don't move," the cops were heard yelling at him.
German Chancellor Olaf Scholz, who was expected to travel to Magdeburg on Saturday, condoled the deaths and said it "raises the worst fears". "My thoughts are with the victims and their families. We stand by their side and by the side of the people of Magdeburg. My thanks go to the dedicated rescue workers in these anxious hours," he said.
The incident follows a warning from the country's security agency that Christmas markets were "ideologically suitable target for Islamist-motivated people". German Interior Minister Nancy Faeser too had urged people to be vigilant at Christmas markets.
The US said it is "shocked and saddened" by the incident and assured assistance in recovery efforts. "The United States is ready to provide assistance as recovery efforts continue and authorities investigate this horrible incident," said State Department spokesperson Matthew Miller.
Tech billionaire Elon Musk, who is set to join US President-elect Donald Trump's administration, has called Scholz an "incompetent fool" and demanded his resignation. He also reasserted his support for the German far-right Alternative for Germany (AfD) and called them the country's saviour. The German government said they have taken note of Musk's remarks, but did not comment on it.
The car-ramming incident follows a spate of suspected Islamist knife attacks in Germany. In August, a Syrian suspect was arrested after a stabbing spree left three dead at a street festival in Solingen. Two months earlier, cops arrested an Afghan suspect after a policeman was killed in a knife attack.