Embassy detectors were set off by traces of bomb-making substances when Mohammed Saif Ur Rehman went in for an interview, said Mario Schilling, a spokesman for the prosecutor in the case.
Schilling did not elaborate on what kind of explosives were involved or say whether Rehman, 28, was suspected of any criminal activity.
US Ambassador Paul Simon told Chile's radio Cooperativa that it doesn't seem to have been an attack.
"It was just traces and they were detected during the interview," Simon said, referring further questions to police.
In Washington, State Department spokesman P.J. Crowley said the suspect already held a US visa, and had been invited to the Embassy "to clarify the information we had on him." Crowley declined to say more about that information.
Crowley said that while Rehman was turned over to Chilean authorities, the US would participate in Chile's investigation.
After Rehman's detention, investigators in white hazardous-materials suits searched his apartment in a student residence in downtown Santiago.
Chile planned to ask for Rehman's detention to be extended for three days so that police can fully gather any evidence, Interior Minister Rodrigo Hinzpeter told Chile's La Tercera newspaper on Tuesday, adding: "We will be relentless in the fight against any form of crime, especially terrorism." Rehman was being held in preventive custody pending a decision on whether to press charges, Schilling said.
El Mercurio newspaper reported that the explosive substances were found in a bag and on documents and a cellular telephone that Rehman was carrying. Schilling neither confirmed nor denied the report.
The paper also reported that Rehman said he was in Chile legally to study tourism, and had a job at a hotel.
His detention comes only days after Faisal Shahzad, a Pakistan-born US citizen, allegedly tried to set off a bomb-laden SUV in New York's Times Square after receiving training from the Taleban in Pakistan.
