Metropolitan Police have said that the ammunition was found in personal lockers in a dedicated police building in the grounds of Buckingham Palace.
The officer arrested in connection with ammunition found in a locker area of Buckingham Palace was not assigned to guard any individual member of the Royal Family, police said.
The arrested officer is being questioned on suspicion of misconduct in public office and unlawful possession of ammunition.
He is in custody at a London police station and will be suspended from duty.
A Royal Protection officer has been arrested following the discovery of ammunition in personal lockers in the grounds of Buckingham Palace.
Metropolitan Police, who announced the arrest, believe the ammunition came from its own supplies.
A Queen's Guard pointed his bayonet-fixed rifle at a member of the public outside the gates of Buckingham Palace when an argument erupted with a police officer, The Sun on Sunday reported.
The soldier left his post to intervene when the man refused to stop shouting at the officer outside the palace gates on Friday, the paper reported, with a photograph showing the guard pointing his rifle towards the man's face.
A Metropolitan Police spokesman said: "Police were made aware of a disturbance at the North-Centre Gate of Buckingham Palace at approximately 5.50pm on Friday, April 4.
"Officers from Royalty Protection spoke to a man and he was given words of advice and there were no arrests."
The Queen's Guard is not believed to be facing any action over the incident.
An Army spokesman said: "We are aware of an incident outside Buckingham Palace on Friday and while no one came to any harm and there were no arrests, we are very clear that the Metropolitan Police lead on Royal Security arrangements including outside the Palace itself."
Buckingham Palace declined to comment.
Prince William wants all ivory in the Royal Collection at Buckingham Palace to be destroyed, according to a leading primatologist.
Leading primatologist Jane Goodall told the Independent on Sunday that the Duke of Cambridge had told her he would "like to see all the ivory owned by Buckingham Palace destroyed".
Prince Charles has reportedly also asked for all ivory items at his Clarence House and Highgrove homes to be removed during the last few years.
Charles and William called on the world to turn its back on illegally traded animal parts like ivory and rhino horn in a video appeal earlier this month.
Illegal trade in animal parts such as rhino horn, tiger parts and elephant tusks is worth more than an estimated £11.5 billion each year.
Creations by Tracey Emin and Grayson Perry will appear among more than 100 contemporary artworks to go on show at Buckingham Palace.
The exhibition will mark the Queen's Diamond jubilee last year, and also features works from David Hockney and Anish Kapoor.
The works were loaned by the Royal Academy and include creations from some of its most high-profile artists.
Mr Hockney's work is a colourful image of the Queen's initials from her cypher "EIIR" created on an iPad, while Emin submitted a monoprint portrait of the monarch titled HRH Royal Britannia.
A man armed with a six-inch kitchen knife was rugby-tackled to the ground by police outside Buckingham Palace after jumping over a barrier to try and see the Queen. 44-year-old David Belmar from Haringey in north London admitted to trespass at Westminster Magistrates' Court today.
Belmar was watched by a crowd of around 20 tourists as he tried to run through the palace's north gate just before 11.30am on Monday. Edward Aydin, prosecuting, said: "In police custody, he said to police 'I wanted to see the Queen. I'm not happy about my benefits'."
He added that Belmar, who has mental health issues which he is taking medication for, has a fixation with the Queen and received a caution in 1989 for lighting fireworks and throwing them into the grounds of Buckingham Palace.
Today's arrest at Buckingham Palace follows a number of security alerts - last month a suspected burglar managed to get into the building after scaling a fence.
He was found at around 10.30pm on 2nd September in a room that had been open to the public during the day.
A second man was arrested outside the Palace on suspicion of conspiracy to commit burglary.
Less than 48 hours later, amid heightened security, two police officers confronted the Duke of York in the Palace gardens demanding to know who he was.
Scotland Yard issued a public apology to the Duke, which he later accepted.
A man arrested trying to gain entry to Buckingham Palace was arrested at the North-Centre Gate which is used as the everyday entrance to the Palace.
Buckingham Palace said that the Queen was not in the building when the man tried to get in, but would make no further comment.