Plasterer Martin Earley (47) from Killala, Co Mayo, was arrested in Ballina, Co Mayo, at 5pm yesterday after he returned to Ireland on holiday for Christmas from his home in England.
Earley has been arrested a total of three times in relation to tragic Sandra's murder, including in March and December of last year.
He was due to appear before Ballina District Court this morning.
Sandra's body has never been found after she disappeared in Killala on the night of December 4, 2000.
It is understood that Earley denies any involvement in the murder.
Sandra, who would have celebrated her 40th birthday in December, disappeared just six months after her younger brother James died in a factory accident.
Her family are desperate to bury her beside her mother and her brother.
Last night, Sandra's sister Bridie said: "I cannot describe to anybody how difficult it is for us to be carrying this around with us. Sandra was 28 when she went missing."
The alarm was raised when she failed to return home after leaving her aunt's house to go to the shops.
About three hours later, at 11pm, she was served in a local fast food outlet where she bought two bags of chips. She was never seen again.
Gardai believe Sandra met someone after going shopping and was still with that person when she went to buy the two portions of chips.
Four days later, her fleece jacket was found on the pier in Killala. Her family told gardai at the time they did not believe she was suicidal.
When her jacket was discovered, some of the items she had bought in the shops were in the pockets.
An extensive search of the sea around Killala was carried out but nothing was found.
Regular appeals for information have been made by her family and gardai over the past 12 years.
During that period, gardai were contacted with information, some of which concerned a white van that was seen in Killala on the night Ms Collins disappeared.
Two other individuals, a man and a woman, have previously been arrested in connection with Sandra's disappearance, on suspicion of withholding information.