A police statement says Michel Smith was detained Friday in the Playa Coronado tourist region, about 100 kilometres west of Panama City.
The statement says Smith was captured after a two-month surveillance operation, adding that he is wanted in Canada on 29 charges, including 22 counts of murder.
Canadian police have been looking for the 49-year-old man since a massive 2009 sweep in Quebec known as SharQc Operation.
Smith is wanted by the RCMP on multiple charges including murder, gangsterism, drug trafficking and conspiracy.
Panamanian police say they are co-ordinating his extradition to Canada.
_ With files from The Associated Press.