Under pressure to show results, with neither Saddam nor his sons captured and no weapons of mass destruction found, Abed Hamid Mahmoud's arrest signals one of the few significant signs of progress for the Bush administration. Third in power only to Saddam and his younger son Qusay, Mahmoud controlled access to the dictator and is reputed to be one of the few people he trusted completely.
A distant cousin of Saddam, he was put in charge of several security portfolios in the 90s, including the sites in which Iraq has been accused of hiding weapons programmes. He started his career as a non-commissioned officer in Saddam's bodyguard.
The official may have information on the fate of Saddam and his sons. US officials have said they want to try Mahmoud, who was caught on Monday, for war crimes or crimes against humanity.
Two months ago, after the arrest of Iraq's former head of military intelligence, a Pentagon spokesman said Saddam's inner circle was "collapsing like a house of cards". But until this week the US has had few major breakthroughs.
It is unclear whether Mahmoud's capture was related to US raids near Saddam's hometown of Tikrit. Troops raided two farmhouses and found $8.5m (£5m) in US currency, 300m to 400m Iraqi dinars and an unspecified amount of sterling and euros, according to Major-General Ray Odierno, commander of the 4th Infantry Division. They also found more than $1m worth of gems.
The soldiers captured one of Saddam's bodyguards and up to 50 people believed linked to his security or intelligence forces or paramilitary groups, according to Gen Odierno. Also discovered were Russian-made night-vision goggles and other military equipment.
Gen Odierno said he did not know whether the cash was intended to pay bounties for attacks on US troops or to provide Saddam loyalists with luxuries while they were in hiding. "They have put a bounty on shooting at American soldiers and trying to kill US soldiers," he said, adding: "I am not willing to comment on how much it is because I really don't know."
He predicted more arrests to come: "We are currently inside of two other sites where we believe we have cornered off and captured up to 30 additional Saddam Special Republican Guard forces."
But reports yesterday from Tikrit and elsewhere suggested that while the raids and arrests were producing occasional triumphs the manner in which they were being carried out was sparking discontent, contributing to one of the most violent days since President Bush declared the war over.
In the Baghdad neighbourhood of Karrada US soldiers called residents from their beds to stand in the street as they searched their homes. One man was taken away .
The US military says about 400 people have been arrested since the Operation Desert Scorpion began on Sunday.
The New York-based advocacy group, Human Rights Watch, yesterday alleged that US troops had used excessive force in the town of Falluja after a demonstration against their searches in the capital for illegal weapons and supporters of Saddam.