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Guzman, known as "El Chapo" (Shorty) in Spanish, runs Mexico's infamous Sinaloa Cartel and over the past decade emerged as one of the world's most powerful organized crime bosses.
His cartel has smuggled billions of dollars worth of cocaine, marijuana and methamphetamines into the United States, and fought brutal wars with other Mexican gangs over turf and drug-trafficking routes. Tens of thousands of people have been killed in the fighting.
Pena Nieto confirmed the arrest via Twitter on Saturday and congratulated his security forces.
A US government source, who spoke on condition of anonymity, said earlier that Guzman was captured by US and Mexican forces, without elaborating.
A Mexican security source said Guzman was detained in Mazatlan, a seaside resort in Guzman's northwestern home state of Sinaloa.
The capture is a huge political victory for Pena Nieto, who took office in late 2012.
"Chapo is the jewel in the crown, the most wanted drug boss in recent years and in that sense this is a great success," said Jorge Chabat, an expert on drug trafficking at the CIDE research center.
Local television broadcast a photograph of a man it said was detained in the operation, who bears a resemblance to Guzman. The man had a small black moustache, and was shirtless.
The 5-foot 6-inch (1.7-metre) tall Guzman's exploits have made him a legend in many impoverished communities of northern Mexico, where he was immortalized in dozens of ballads and low budget movies.
The United States had placed a $5 million bounty on 56-year-old Guzman's head and authorities in Chicago last year dubbed him the city's first Public Enemy No.1 since gangster Al Capone.
Nearly 80,000 people have died in drug-related killings in Mexico since former President Felipe Calderon sent in the army in early 2007 to quell the powerful drug bosses, a policy that Pena Nieto has criticized but found tough to break with.
From humble beginnings in a ramshackle village, Guzman rose up in the 1980s under the tutelage of Sinaloan kingpin Miguel Angel Felix Gallardo, alias "The Boss of Bosses," who pioneered cocaine smuggling routes into the United States.
He came to prominence in 1993 when assassins who shot dead Roman Catholic Cardinal Juan Jesus Posadas claimed they had been gunning for Guzman but got the wrong target.
Guzman is the latest in a series of high profile capos to be caught or killed.
Last July, Pena Nieto's government caught the leader of the Zetas drug cartel, Miguel Angel Trevino, aka Z-40.
The Zetas have been blamed for many of the worst atrocities carried out by Mexican drug gangs, acts that have sullied the country's name and put fear into tourists and investors alike.
Founded by army deserters in the late 1990s, the Zetas initially acted as enforcers for the Gulf Cartel. But cracks began to appear and the rupture was sealed in early 2010, setting off the most violent phase in Mexico's drug war.
Calderon, a conservative, had staked his reputation on bringing Mexico's powerful drug gangs to heel, sending in the armed forces.
While his forces captured or killed many of the top capos, cartels splintered amid leadership challenges and turf wars exploded across Mexico.
He congratulated Pena Nieto and his government in a message on Twitter on Saturday, describing the arrest as a "great blow."
Analysts were divided on who whether Guzman's lieutenant Ismael "El Mayo" Zambada would take the helm of the Sinaloa Cartel.
Alejandro Hope, security director at the Mexican Competitiveness Institute think tank, said Guzman's downfall represented the end of a 30-year era of high-profile drug lords running riot across Mexico.
"There will be very few figures of this caliber," he said.
Pena Nieto has sought to play down the drug fight in public, instead seeking to focus public attention on a series of economic reforms spanning energy to telecoms which he has pushed through Congress and aim to boost long-lagging economic growth.
He has also tried an unorthodox strategy, co-opting vigilantes in western Mexico in the fight against the feared Knights Templar Cartel, which security experts is potentially playing with fire.
Guzman has been caught before, and famously gave his jailers the slip.
He escaped a Mexican prison, reportedly in a laundry cart, in 2001 to become the country's most high-profile trafficker. He is believed to command groups of hitmen from the US border into Central America.
He was indicted in the United States on dozens of charges of racketeering and conspiracy to import cocaine, heroin, marijuana and crystal meth.
Guzman was listed for a time in Forbes' annual list of billionaires around the world but he was dropped last year, because it was impossible to verify his wealth.