The man was reportedly “deep inside” the royal residence in one of the 19 state rooms open to public tours.
A suspected accomplice was held in the street outside the royal residence and arrested on suspicion of conspiracy to burgle.
Both men were questioned at length before being bailed.
Full background checks were being carried out by officials seeking to rule out any connection to terrorism.
No members of the Royal Family were present when the break-in occurred at around 10pm on Monday.
However, a probe is under way to ensure their safety is not compromised. The Queen has been told of the break-in.
The intruder was reportedly “deep inside” the palace in one of 19 state rooms open to public tours.
One source said: “This is being treated with the utmost seriousness. There are many red faces as the man gained access unchallenged.
“An investigation will set out to ensure that this never happens again.”
Scotland Yard last night said: “Police arrested two men following an incident in the vicinity of Buckingham Palace at approximately 10.20pm on Monday.
“Both men have been bailed to return to a Central London police station and enquiries continue.
“A review of the specific circumstances of this incident has been carried out.
"No members of the Royal Family were at Buckingham Palace at the time of the incident."
Buckingham Palace did not comment.
Officials had claimed there would not be another security breach after Michael Fagan broke into the palace in 1982 and walked into the Queen’s bedroom as she slept.
The unemployed father of four, 31, spent around 10 minutes talking to the Queen after he climbed over the palace walls and up a drainpipe.
The Queen managed to raise the alarm when Fagan asked for a cigarette, allowing her to call for a footman who held him until police arrived.