Chile's state television said Thursday night that the traces were found on clothes seized in a search of Mohammed Saifur Rehman Khan's home.
Investigators also were looking for five more people known to Khan for questioning, the report said.
National prosecutor Sabas Chahuan said that "I think there is a crime." Khan, 28, is being held for a week under Chile's anti-terrorism laws while being investigated for alleged explosives violations. He was summoned to the US Embassy on Monday because his US visa had been revoked, and he was arrested after security equipment detected traces of explosives on his phone and papers.
Khan's public defender, Francisco Geisse, said evidence thus far "doesn't show the existence of a crime." State TV said on the evening news that crime lab personnel had identified the material as Tetryl, a compound used to increase the explosive power of TNT. Police in white suits also took away Khan's computer earlier this week.
Police spent hours Thursday searching the apartment of an Egyptian man who was friendly with Khan.
Officers dressed head-to-toe in white anti-contamination suits carried out a computer, compact discs, an agenda and a cell phone, police said. The Egyptian man who reportedly befriended Khan at a mosque in the Chilean capital of Santiago was not seen by reporters, and police released no information about him.
Khan came to Chile in January to study Spanish and the hotel industry after staying with his brother, a doctoral student at Michigan State University, for a month last year, according to the Pakistani Embassy.
"We have many questions and few answers," said Pakistani Ambassador Burhanul Islam, who promised legal and consular support to Khan.
The US ambassador to Chile, Paul Simon, has said there is no indication that the embassy was the target of an attack.
Khan was detained nine days after a Pakistan-born US citizen allegedly tried to set off a car bomb in New York's Times Square after receiving training from the Taleban in Pakistan. But by then, the US had already decided to revoke Khan's visa, State Department spokesman Mark Toner said.
"This issue predates the Times Square incident and we are not aware of a connection between the two," he said.
State Department spokesman P.J. Crowley said the US government will cooperate fully with the Chilean investigation of Khan.
"There were solid grounds for apprehending him and he will be charged under Chilean laws," Crowley said.
The Pakistani Embassy said Khan had been called to the US Embassy "to have an interview regarding his documents, in particular his passport and his academic certifications." The embassy said Khan denied he possessed explosive materials or had links to terrorist organizations.
"He would have to be a very bad terrorist to enter the embassy with traces of explosive material, knowing that the embassy is a dangerous place where he would face serious accusations if he were caught," said Islam, the ambassador.
Khan denied any terrorist connections or experience with bombs when he briefly spoke to reporters through the window of a police vehicle, before he was taken to the high-security prison.
