Valdez, 37, is believed to have been a key lieutenant of Arturo Beltran Leyva, who headed the cartel that bears his name and was Mexico's third most-wanted man until his December 2009 death in a military operation.
As a head of the Beltran Leyva's assassination squad, Valdez was thought to be involved in a power struggle to replace Arturo, competing with his brother, Hector Beltran Leyva.
The arrest, which is a major coup for the government amid spiralling drug violence, was confirmed by the attorney general's office, the interior and public security ministries and even Mexican President Felipe Calderon on Twitter.
The Beltran Leyva gang, one of a string of violent drug gangs operating in Mexico, was dealt a severe blow with the death of chief Arturo last December and then the arrest of his younger brother, Carlos.
It broke off from the powerful Sinaloa drug trafficking organization in 2008.
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