Cambodian police said the arrest of Patrick Devillers was carried out with the cooperation of Beijing, which is seeking his extradition.
"We've been informed by the Cambodian authorities of the arrest of our compatriot Mr. Devillers," a French embassy spokeswoman told AFP.
Officials were seeking "clarification" about the reason for the arrest, she said.
Devillers is understood to have been a close business associate and friend of Bo and his wife Gu Kailai.
Bo, the former leader of the southwestern Chinese megacity of Chongqing, is being probed for corruption while Gu has been detained for suspected involvement in the murder of British businessman Neil Heywood last year.
Phnom Penh police chief Touch Naruth confirmed that a French national was arrested "about two weeks ago" but declined to give details, saying only the arrest was made "with the cooperation of China".
"We are considering whether to send him to China or France. China has demanded he be sent to China because he committed offences there," he told AFP.
Devillers' connection to the Bo family drama remains unclear but in an interview with French daily Le Monde last month he denied allegations of any wrongdoing.
Devillers, 52, who is believed to have left China in 2005, also told the newspaper that his old acquaintance Heywood, who was found dead in a hotel room in Chongqing in November, was "a noble soul".
According to the New York Times, Devillers was hired by Bo, mayor of the Chinese city of Dalian in the 1990s, to carry out architectural work.
And in 2000, Devillers and Gu set up an architectural firm together, the US daily reported in May, noting that the pair put down the same residential address in Bournemouth, southeast England, in their paperwork.
The scandal surrounding Bo and Gu, which first came to light in February and made worldwide headlines, has exposed deep divisions within the Communist Party ahead of a crucial, once-in-a-decade leadership transition, analysts say.
Bo was a member of the powerful Politburo and had been tipped for promotion to the nine-member Politburo Standing Committee, China's most powerful political body, during the leadership transition.
But his hopes of winning a spot on the body were ended by his fall from grace, which began when his former right-hand man and police chief Wang Lijun fled to a nearby US consulate to seek asylum, after reportedly confronting Bo with information related to the murder of Heywood.
News of Devillers' arrest comes just a week after He Guoqiang, a member of the Politburo Standing Committee, paid a visit to Phnom Penh during which multi-million dollar infrastructure deals were signed.
It is unclear whether there is any link between the "goodwill" visit and Devillers' arrest. Phnom Penh is a close ally of China and Cambodian Prime Minister Hun Sen regularly praises Bejiing's no-strings-attached aid.
China is Cambodia's largest bilateral creditor and its biggest foreign investor, with hundreds of Chinese companies pumping billions of dollars into the impoverished country in recent years.
In 2009, Cambodia was widely criticised for deporting 20 Uighur asylum seekers to China, a move that was quickly followed by a 1.2-billion-dollar aid and loan package from Beijing. China rejected accusations of a link between the two.