The carabinieri police said the 58-year-old had engaged in "continued theft of public water" to the detriment of the 18th-century Royal Palace of Caserta, a UNESCO heritage site built by the King of Naples, Charles of Bourbon.
Police said they were alerted after the palace, now a museum, complained about water shortages in the basins and fountains of its lush landscaped gardens.
The suspect allegedly tapped into the Caroline Aqueduct, funnelling the water through an illegal pipeline to transport it 145 metres (475 feet) to his agricultural property, which police said they seized.
"The pipe reached six different areas of the farmland for irrigation as well as a 1,000-litre cistern for water collection," they said in a statement.
The suspect was identified as the concessionaire of the agricultural property owned by a religious organisation.
He was put under house arrest.
The palace, which boasts 123 hectares (300 acres) of gardens, said in a statement it had suffered a "serious water shortage" at its waterfall, fountains and basins.
It said it had avoided using its watering systems for the lawns, causing them to turn yellow, adding that dealing with the situation had caused them "very difficult months".
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