Speaking to the German news magazine Der Spiegel in remarks published on Saturday, Holbrooke said he had been "beside myself with joy" at the news of Karadzic's arrest in Belgrade on Monday.
The 67-year-old, who is seen in the US as a possible secretary of state if Barack Obama wins the presidential election, said he saw Karadzic as more evil than either Yugoslav leader Slobodan Milosevic or Bosnian Serb military commander Ratko Mladic.
"He would have made a good Nazi," Holbrooke said.
Crimes against humanity
Karadzic faces crimes against humanity and genocide charges in The Hague.
The arrest showed that radical and extremist forces in Serbia had been weakened, Holbrooke said, congraulating the European Union for the pressure it had applied, using eventual membership for Serbia as inducement.
Milosevic died in his prison cell in March 2006 while being tried in The Hague for war crimes committed in the Balkan wars of the 1990s. Mladic remains at large.
Holbrooke brokered the 1995 Dayton Accords to end the 1992-1995 ethnic war. He subsequently became US ambassador to the United Nations.