Balfour, 27, was in custody at Stateville prison for a parole violation.
He is now being held at Chicago's Area One police headquarters.
Almost every sign over the past five weeks has been pointing to Balfour, but he has not been charged so far. Police sources say that he will be charged with three counts of first-degree murder.
Up until now, the police have been calling Balfour only a person of interest. But at 2:45 Monday afternoon, police served him with an arrest warrant at the Stateville Correctional Center, where he's been held for the past five weeks. He was released to detectives and brought back to Chicago, where he's now awaiting formal charges.
Three counts of first-degree murder are expected for the deaths of Darnell Donerson, 57; Jason Hudson, 29; and Julian King, 7. Jennifer hudson's mother and brother were found in their home, and her young nephew was found three days later in an SUV.
The police found a .45 caliber handgun in a lot near where King's body was found and say it was the weapon used the murders.
Balfour is the estranged husband of Jennifer Hudson's sister Julia, 31. Until Monday, he was being held for violating parole. Balfour was taken into custody the same day that the bodies were discovered.
He's acknowledged being at the home the morning of the murders, Friday, October 24. But since then, police say, he has refused to take a lie detector test and has stopped cooperating with the detectives.
Balfour's mother was at the police station Monday defending her son.
"If they found gunpowder on his hands, you got a case. You found a gun on him, he got a case. If they found a fingerprint on the truck that he did this, you got a case. But they don't have nothing," said Michele Davis-Balfour, William Balfour's mother.
Balfour's girlfriend has told police that she saw him with a gun that matched the murder weapon. But Chicago police will not say exactly what evidence it was that led them to arresting Balfour Monday.
The charges will likely be filed sometime Tuesday.