Jerry Chun Shing Lee was arrested following an intensive investigation which began in 2012 as a number of US informants were identified by China.
An FBI inquiry into how the names of CIA spies were falling into Chinese hands led investigators to Mr Lee.
Mr Lee, 53, was arrested at Kennedy Airport and charged with unlawfully retaining national defence information.
He had been living in Hong Kong after leaving the agency in 2007 and was arrested by US authorities who learned he was returning to the United States.
After a previous trip which saw him return to the US, agents searched his luggage and hotel room and reported finding small notebooks containing classified written information.
The notes continued details of meetings with informants, their real names and contact numbers, court papers reveal.
The information lines up with data contained in key highly-classified memos written by Mr Lee while he was at the agency, it is claimed.
An array of alternative theories were developed in attempts to find the cause of the collapse of the intelligence operation.
The presence of a mole within the CIA was proposed by intelligence officials, it has been reported.
While it was suggested by others that the top-secret communications network used to contact foreign intelligence assets had been hacked to leading authorities in China to the sources.
Others reportedly believed that it was a combination of both coupled with poor execution from agency officers operating in China.
News of the arrest comes after China launched a new satellite into space to spy on the surface, state-run Xinhua news agency revealed.
The satellite is designed for remote-sensing of land resources, and the technology will analyse vegetation, water, impervious surfaces, nutrients, and soil.
However, the launch comes just after two other space missions launched over the past few days.
Two SuperView-1 Earth-observation satellites and a Long March 3B rocket have been sent into orbit since last Thursday.
Local media has previously reported that the country plans to soon have Big Brother style “ghost imaging” satellites that will allow them to track all US military planes.
The spy satellites will allow the Chinese government to track stealthy targets such as US B-2 Spirit stealth bombers, which usually cannot be seen, within 10 years.
Using a system called ghost imaging China will be able to take pictures of the military air force, even if they are flying below heavy cloud.