Disaster crews were racing to finish an emergency dam to avert a second spill of the by-product of alumina production from the sludge reservoir owned by the MAL Zrt company.
A million cubic meters of red mud burst out of the reservoir last Monday, flooding three local villages and fouling rivers including a tributary of the Danube.
Government spokeswoman Anna Nagy said Zoltan Bakonyi, the head of MAL, had been detained for 72 hours.
Police spokeswoman Monika Benyi said police were questioning a man on suspicion of "endangering public safety, causing multiple deaths and causing damage to the environment."
Prime Minister Viktor Orban told parliament damages must be paid to those affected by the spill, jobs at the plant must be saved, those responsible must be held accountable and further risks at the company's sites should be identified.
"Hungary's largest ecological disaster was caused by human negligence, by allowing a hazardous material to escape," Orban said. "We need to bring the company responsible for the red sludge spill under state control, and its assets under state closure, until all of these four tasks are handled," he told parliament.
Orban said a state commissioner would be appointed to take over control over MAL and manage its assets.
"In light of what happened, we have good reason to believe that there were people who were aware of the dangerously weakened state of the walls of the reservoirs, but driven by their private interests they believed they were not worth repairing and hoped that the trouble could be avoided."
Disaster crews were racing to finish an emergency dam to protect the village of Kolontar in case the weakened wall of the damaged reservoir falls.
"We hope to have the dam finished by Tuesday," the prime minister's spokesman told TV2.
With the nearby town of Devecser, home to 5,400 people, still on alert and Kolontar evacuated, the exact cause of the disaster remained unclear.
In a statement on its website Sunday, MAL said the walls of the reservoir met the prescribed rigidity standards, based on the findings of a technical survey carried out in 1995.
A team of EU environmental experts arrived in Hungary on Monday to help authorities.
