"Police have detained retired Gen. Metodi Stamboliski ... on the suspicion that he abused his authority," police spokesman Ivo Kotevski said.
The spokesman said Stamboliski, 60, is suspected of ordering four times the quantity of tank parts required by the armed forces in November 2001.
"He was not authorized to sign that deal and he damaged the state," Kotevski said.
The deal was signed after a conflict between FYROM government forces and Muslim Albanian separatists in 2001. The six-month conflict is blamed for the deaths of 80 people.
Kotevski said Stamboliski appeared in court Tuesday for questioning. Formal charges are still pending, he said.
FYROM is the Former Yugoslav Republic of Macedonia.