A statement from the President's Office said that Yameen had declared 15 days of state of emergency, starting Monday, and during this period, though certain rights would be restricted, general movements, services and businesses would not be affected.
The country receded into chaos on Thursday, when the supreme court called for the release of nine imprisoned opposition politicians, ruling that their trails were politically motivated and flawed.
Security forces are reported to have entered the Supreme Court following his refusal to carry out its ruling that jailed opposition leaders should be freed.
He went on to accuse the two detained judges of corruption.
The surprise judicial ruling last week has led to an increasingly tense standoff between President Yameen Abdul Gayoom and the Supreme Court, with protests spilling into the streets of the capital, Male, and soldiers in riot gear deployed to the parliament building to stop lawmakers from meeting.
Nasheed said Yameen has illegally declared martial law.
In a statement, Department of State spokeswoman Heather Nauert said the United States "is troubled and disappointed" by reports of the state of emergency.
Three of the five Supreme Court Justices for the Maldives have annulled their own order to free political prisoners after two of the court's justices were arrested.
Yameen did not honour the court orders and declared emergency on Monday night, giving special powers to forces to make arrests and bar public gatherings.
Since Mr Yameen took control of the overwhelmingly Muslim country of 400,000 people in 2013, his government has faced heavy criticism over the detention of opponents, political influence over the judiciary and the lack of freedom of speech.
Police said Mr Gayoom had been arrested on charges of plotting to overthrow the government.
Mr Gayoom - who is the half-brother of Mr Yameen and was president between 1978 and 2008, when the country became a multi-party democracy - urged supporters to "remain steadfast in your resolve".
While there was no immediate sign of India preparing to send troops to the Maldives, New Delhi does have a history of military involvement there.
Nasheed is exiled in Britain since he was ousted in 2012 and sentenced to 13 years in prison on terrorism charges.
Police were also dispatched to the Supreme Court. It also ruled that the 2015 trial of former PresidentMohamed Nasheed, who is living in exile, had been unconstitutional.
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