Canada arrested China's Huawei Technology's chief financial officer at the request of the US for allegedly violating sanctions on Iran, the Wall Street Journal reported on Wednesday.
Meng Wanzhou faces possible extradition to the US, WSJ added. A Canadian justice department spokesperson said she was arrested on 1 December.
A Huawei spokesman said the arrest happened as Meng was transferring flights.
"The company has been provided very little information regarding the charges and is not aware of any wrongdoing by Ms Meng," he said.
"The company believes the Canadian and US legal systems will ultimately reach a just conclusion."
Meng's bail hearing is set for Friday, according to a Globe and Mail report, citing Canada's justice department spokesman Ian McLeod.
Meng's arrest follows a strict set of US sanctions on Iranian oil and banking that was implemented in November but allowed several countries, including China, temporary waivers.
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According to a WSJ report in April, the US Department of Justice had launched a criminal probe into Huawei for its alleged trade with Iran, and both the Commerce Department and Treasury Department had issued subpoenas for a potential violation of US sanctions.
Huawei is the world's largest manufacturer of cellular-tower electronics and the third-biggest smartphone producer.
Meng's arrest happened on the same day that US President Donald Trump and Chinese leader Xi Jinping met to discuss a possible truce to their ongoing trade war.
US Senator Ben Sasse, a Republican, said the arrest was made to protect American interests.
"Americans are grateful that our Canadian partners have arrested the chief financial officer of a giant Chinese telecom company for breaking US sanctions against Iran," he said.
This isn't the first time that the US has penalised Chinese telecommunication companies for potential sanctions violations.
In 2017, Chinese telecommunications rival ZTE paid the US almost $900m in fines for alleged business deals with Iran.