The 65-year-old landlord of the Bristol flat where landscape architect Jo Yeates lived has been arrested on suspicion of her murder.
Police said the man, understood to be retired teacher Chris Jefferies, was arrested at the flat in Canynge Road above the one rented by Miss Yeates.
Her body was discovered on Christmas Day, eight days after she disappeared. The 25-year-old had been strangled.
Mr Jefferies formerly taught English at the public school, Clifton College.
Miss Yeates was last seen alive on 17 December, when she was seen on CCTV visiting an off licence and two supermarkets near her home.
Her boyfriend, Greg Reardon, with whom she lived, reported her missing two days later when he returned home from visiting family in Sheffield.
Miss Yeates' body was found in Longwood Lane, in Failand near Bristol, by a couple walking their dogs.
Mr Jefferies, who lived above the Victorian basement property he rented to Miss Yeates, is being detained for questioning at a police station within the Avon and Somerset force area.
Police have removed two cars from the street where Miss Yeates lived - a silver Chrysler which was parked on the road and a grey Volvo S40 which was parked in a driveway.
Resident Tony Buss, 51, confirmed the Chrysler belongs to Mr Jefferies.
Mr Buss said: "Today's news is a shock and surprise."
He said the community had been worried about a killer on the loose.
Another neighbour, a 26-year-old man who did not want to be named, said: "It's all been pretty scary, especially for my girlfriend as I'm away most of the week so it's been pretty scary for her to be home alone.
"We chose the area of Clifton to live in because we thought it was safe."
Referring to Mr Jefferies, he said: "We see him all the time on the road."
Miss Yeates' keys, mobile phone, purse and coat had been left behind at her flat and forensic examiners have said there was no sign of a forced entry or a struggle at the property.
Mr Jefferies, 65, reportedly told police he saw three people, one of whom he believed was the landscape architect, leaving the Victorian block of flats.
The retired public school teacher said he spotted the trio shortly after 2100 GMT on 17 December, not long after Miss Yeates arrived home alone, as he parked his car in the street.
Mr Jefferies is understood to have reported the sighting to police, who have confirmed they are examining the evidence.
But speaking outside his home on Wednesday, Mr Jefferies denied he had told police he saw Miss Yeates leaving with two unidentified people.
Miss Yeates is known to have left the Ram pub, on Park Street, at about 2000 GMT on the night she disappeared.
Police have issued CCTV images of her then visiting a Waitrose store on The Triangle, a Bargain Booze shop, and a Tesco Express near her flat.
She bought a pizza at the Tesco store but while the receipt was found at her flat, no trace has been found of the food or its wrapper.
A police spokesman said: "Detectives investigating Joanna's murder are continuing to carry out forensic examinations, and are also continuing to appeal for anyone with any information that can help the inquiry to call the Operation Braid incident room."
Miss Yeates' parents, David and Teresa, who live in Hampshire, had appealed for help in finding their daughter and spoke of their relief when her body was found.
Crimestoppers has offered a £10,000 reward for information leading to the arrest and conviction of her killer.