
Haim Pearlman was detained on Tuesday, but the news was blocked by a court order that was lifted on Wednesday.
Mr Pearlman insists he is being framed by the Shin Bet security service.
Israeli media say he is a member of the banned far-right Kach movement, which advocates the removal of Arabs from Israel, the West Bank and Gaza.
He has spent time in jail in the past for assaulting Palestinians and was questioned by police this year after "wanted" posters bearing the picture of Prime Minister Benjamin Netanyahu were posted in Tel Aviv, they add.
In an interview with Israeli Channel 2 television broadcast on Wednesday, the 29-year-old former settler claimed Shin Bet was framing him for the murders because he had refused to serve as an informant and kill an Israeli Arab for them.
"They are trying to pin something on me," he said. "I didn't kill."
Reports say Mr Pearlman is suspected of being behind a series of stabbings in Jerusalem's ultra-Orthodox Jewish district of Mea Shearim.
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