Karachi, Pakistan ? Police arrested a British-born Islamic militant Tuesday they say masterminded the kidnapping of Wall Street Journal reporter Daniel Pearl  the biggest break yet in the quest to free him. An official close to the investigation said the suspect told police Pearl is alive.

Ahmad Omar Saeed Sheikh, 27, was arrested Tuesday afternoon in the eastern city of Lahore, according to Tasneem Noorani, a senior official of Pakistan’s Interior Ministry. Saeed was flown to Karachi late Tuesday for further questioning, the government news agency reported.

Following the arrest, police fanned out across this city of 14 million people, raiding homes of suspected Islamic extremists and searching settlements along the bleak and thinly populated Pakistani coast. Police cautioned that rescuing Pearl could still take time.

Saeed “is one who is highly educated and one who I would feel is a hard nut to crack,” Karachi Police Chief Kamal Shah said. “I don’t think it would be very easy to break him straight away. It would take time I feel before we get all the details about Daniel from his interrogation.”

Saeed’s capture followed an intensive, nationwide manhunt and was announced ahead of Pakistani President Pervez Musharraf’s meeting today with President Bush in Washington. Musharraf is expected to seek U.S. economic and political support to help combat Muslim extremism in this predominantly Islamic country of 147 million people.

The Pearl kidnapping has been an embarrassment for Musharraf, who’s been trying to dispel Pakistan’s image as a hotbed of Islamic fundamentalism. Saeed’s arrest is a boost for the Pakistani leader as he meets Bush.

Pearl, 38, the Journal’s South Asia bureau chief, disappeared Jan. 23 on his way to meet with Islamic extremist contacts. He was believed working on a story about links between Pakistani militants and Richard C. Reid, the man accused of trying to detonate explosives hidden in his sneakers on a Paris-to-Miami flight in December.

Jamil Yousuf, head of a citizen-police liaison committee involved in the investigation, said the bearded, bespectacled Saeed told police that threats to kill Pearl were not carried out. “He’s alive. He’s OK,” Yousuf quoted Saeed as saying of Pearl.

Yousuf said the key break came Monday night with the arrest of a suspect in the capital of Islamabad who gave crucial information. Yousuf did not elaborate.