The UN had warned on Monday that the country was teetering on the edge of a renewed civil war after fighting in the north between an armed group allied to Machar and government forces.
Machar was "in confinement by the government" and his life was "at risk", opposition spokesperson Pal Mai Deng said in a video address on Wednesday night.
The head of the UN mission in South Sudan, Nicholas Haysom, said following reports of the detention of Machar, all parties should "exercise restraint and uphold the Revitalized Peace Agreement".
South Sudan's five-year civil war, in which 400,000 people were killed, ended in a 2018 peace agreement that brought President Salva Kiir and Machar together in a unity government.
Machar is one of the five vice presidents in the country.
Tensions have been increasing between Kiir and Machar's parties and escalated in February when the White Army, an armed group loyal to Machar, overran an army base in Upper Nile state and attacked a UN helicopter.
The government responded with air strikes, warning any civilian in the area where the army group was based to vacate or "face consequences".
More than a dozen people have died since the air strikes started in mid-March and the UN warned of a renewed civil war if the leaders did not put the country's interests first.
"Tonight, the country's leaders stand on the brink of relapsing into widespread conflict or taking the country forward towards peace, recovery and democracy in the spirit of the consensus that was reached in 2018 when they signed and committed to implementing a Revitalized Peace Agreement," Haysom said in a statement on Wednesday night.
An opposition official described 20 heavily armed vehicles arriving at Machar's home, where he was arrested alongside his wife.
"His bodyguards were disarmed, and an arrest warrant was delivered to him under unclear charges," said Reath Muoch Tang, an official in the Sudan People's Liberation Movement/Army - In Opposition.
In a statement on X, the US State Department's bureau of African affairs urged Kiir to reverse the house arrest and "prevent further escalation of the situation."
In early March, several of Machar's senior allies were arrested by security forces, an action his supporters condemned as a "grave violation" of the peace deal.
