Canadian publication The Globe and Mail reported that Meng Wanzhou, the global chief financial officer at the Chinese telco, faces extradition to the US.
The Globe and Mail reported Wednesday that USA authorities allege Meng attempted to evade the US trade embargo with Iran, though StarMetro has not independently verified this claim.
Huawei's relationship with the US just took a turn for the worse.
Huawei is one of the world's leading makers of telecommunications network equipment.
The arrest of Wanzhou Meng, Huawei's chief financial officer and board deputy chair, has been confirmed by the Canadian authorities.
This story is developing.
'The Canadian police, at the request of the United States, arrested a Chinese citizen who had not violated any USA or Canadian law, ' the embassy said in a short statement on its website. The U.S. previously banned ZTE, a Huawei competitor, for violating a sanctions settlement over transactions with Iran and North Korea.
Huawei added that it "complies with all applicable laws and regulations where it operates, including applicable export control and sanction laws and regulations of the UN, US and European Union".
In June, Canada's Globe and Mail newspaper reported that USA lawmakers warned the Canadian government that Huawei posed a major cybersecurity risk.
United States stock futures dropped sharply on the news, which has presented a new twist in sensitive trade negotiations between Washington and Beijing.
The Embassy of the People's Republic of China in Canada said that it resolutely opposes Meng's arrest and demands her immediate release. And perhaps more importantly, US officials have urged other countries to ban telecom companies from purchasing Huawei equipment.
Huawei CFO Meng Wanzhou was arrested in Vancouver on Dec1, according to Canadian authorities.
The report said existing Huawei equipment at the firm's current 3G and 4G networks would also be removed.
Huawei later said the HP equipment was ultimately not provided to Iran either by Huawei or Skycom, Reuters said. That probe became public in April, according to the Globe and Mail newspaper, which first reported the arrest on Wednesday. The Pentagon stopped offering Huawei's devices on USA military bases citing security concerns.
Huawei's comments came in response to the FCC's notice of proposed rulemaking (NPRM) for Protecting Against National Security Threats to the Communications Supply Chain Through FCC Programs.
Huawei, for its part, has denied sharing information with the Chinese government, as has ZTE.