The 70-year-old priest from Borja in Spain's Zaragoza region was remanded in custody without bail on Thursday evening, Spain's El Mundo newspaper reported.
He was briefly taken into custody on November 29th, but later released.
Florencio Garcés is one of six men arrested in part of a fraud sting dubbed by police as Operation Thorn Tree.
The judge overseeing the case said Garcés had embezzled more than €185,000 ($251,000) from the parish where he worked.
The village of Borja hit world headlines in 2012 when local parishioner Cecilia Giménez 'monkified' the 19th century fresco Ecce Homo. She carried out the work after fearing that parts of the fresco were flaking off due to damp on the church walls.
Read The Local's in-depth profile of Cecilia Giménez: the world's worst art restorer.
The amateur results captured international attention, inspiring ridicule but have also brought many tourists to the town. Entrance to the church costs €1 ($1.30) with all funds going to the renovation of the building. So far visitors have contributed €50,000 to church coffers.
The lawyer for Garcés has previously said, however, that the current charges did not relate to money earned though visitors to see the Ecce Homo.
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