The Libyan coastguard on Saturday intercepted a ship with a 12-man foreign crew that it said was smuggling diesel and escorted it to the marine base in Tripoli.
"The coastguard was conducting a reconnaissance mission when it intercepted the tanker carrying about 1.66 million litres of diesel," coastguard official Abu Ajila told AFP.
He said the crew of the "Captain Khayyam" was arrested, adding that they were of Ukrainian, Turkish and Azerbaijani nationality.
Libya has Africa's largest oil reserves, estimated at 48 billion barrels. Its production was estimated at 1.6 million barrels per day in 2011 but has plunged by a third since.
The country is mired in chaos, controlled by armed groups since longtime dictator Moamer Kadhafi's fall in a 2011 revolution.
It has had rival administrations since August 2014, when an Islamist-backed militia alliance overran Tripoli, forcing the government to take refuge in the country's far east.
Political and security problems plaguing the North African country have made it easier for contraband and people smugglers to operate.