A former CIA station chief, convicted in Italy of kidnapping an Egyptian Muslim cleric, has been arrested in Panama, Italian and Panamanian officials have said.

Robert Seldon Lady, the former CIA chief in Milan, entered Panama, crossed the border into Costa Rica and was sent back to Panama where he was detained, according to an Italian official.

Speaking on condition of anonymity, a Panamanian police official said Seldon Lady had been arrested by Panama's border authorities and handed over to Interpol.

The CIA declined to comment.

Italy's highest court last year upheld a guilty verdict against Seldon Lady for the kidnapping of Hassan Mustafa Osama Nasr, who was snatched from a Milan street in 2003 and flown to Egypt via Germany for interrogation, where he says he was tortured for seven months.

Nasr says he was tortured with electric shocks, beatings, rape threats and genital abuse.

The imam, also known as Abu Omar, was a resident in Italy at the time of the abduction.

Seldon Lady was given a nine-year prison sentence and another 22 Americans seven-year sentences in absentia for the abduction of the imam.

The Italian trial was the first of its kind against the "rendition" flights practised by the administration of former US President George W Bush, which have been condemned by human rights groups.

The Italian government asked for the former CIA agent - "Mister Bob" - to be held in Panama and now has two months to request his extradition.

It was not clear however where Seldon Lady would be taken. Italy and Panama have no bilateral extradition treaty, according to documents on the Italian Justice Ministry's website.

A 2006 amnesty in Italy shaves three years off all sentences meted out by Italian courts, meaning if Lady is brought back to Italy, he would face six years in prison.