The health ministry said a woman was killed and 12 people injured but gave no other details.
At least seven people were also injured in the accident and have been hospitalised.
The balloon was travelling over the ancient city when it was forced off course and into a mountainous area by strong winds, according to reports.
Multiple sources have told the Herald that three or four Kiwis were onboard the balloon, which plummeted to the ground near Luxor on Friday, killing a South African tourist. The Karnak Temple Complex, which dates back to around 2000 B.C., is located within the modern-day city.
How the arrest at Hyatt Regency Downtown unfolded — TIMELINE
The man, whose identity hasn't been released, also had a handgun, a shotgun and troves of ammunition, cops told local media . The officer called for what's been described as urgent backup around 1:30 a.m. when his attempts to subdue the man failed.
New Zealanders are understood to have been involved in a fatal hot air balloon crash in Egypt.
In a similar incident in 2013, 19 tourists from Europe and Asia, were killed when a sightseeing balloon caught fire in Luxor. Balloon flights were grounded for two months after that accident.
Hot air balloon crashes have occurred in the region before.