"For at least three years, he photographed camps and other infrastructure of the (Greek) armed forces in Chios and was paid to give the material to Turkish nationals," the police said in a statement.
Last week, four men -- two Greeks and two Turks of Kurdish origin -- were arrested by the coastguard off Chios, for transferring a large amount of weapons and explosives to Turkey.
Further arrests have been made by Greece's anti-terrorism squad, which has
taken over the case.
Those arrested are mostly Turks of Kurdish origin, suspected of belonging to the Kurdish Revolutionary People's Liberation Party-Front (DHKP-C), which is considered a terrorist group by Turkey and many Western countries.
At the time of the German's arrest, he was carrying two cameras containing photographs of military camps on the island, police said.
During a search at his house in Chios, where he has been living for four years, police further found laptops, maps, mobile phones and a pair of glasses with a built-in camera.
A search in his email account revealed a message describing the coastguard's arrest of the four men last week.
According to police, the suspect claims he was first hired in the summer of
2010 to provide photographic material and his payments ranged between 500 and
1,500 euros ($665 to $1990) for each mission.
Turkish press recently accused Greece of harbouring terrorists, with daily
Today's Zaman running an article titled "Terrorists sheltered by Greece may
attack Turkish, American interests."
The accusation caused a strong reaction from Greece's foreign affairs ministry.
"Such articles... are well beyond the bounds of bizarre and inexplicable
conspiracy theory," said the ministry's spokesman Konstantinos Koutras who
questioned the motivations behind the publication, when asked about it.