The suspect, who is not identified by name, is currently in a German prison on an unrelated matter, according to a statement from the U.K.'s Metropolitan Police.
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Madeleine vanished on May 3, 2007, at a resort in Praia de Luz, located in the Algarve region of Portugal, while her parents dined just a few hundred yards away.
"Following the ten-year anniversary, the Met received information about a German man who was known to have been in and around Praia da Luz. We have been working with colleagues in Germany and Portugal and this man is a suspect in Madeleine's disappearance," said Detective Chief Inspector Mark Cranwell, who leads the McCann investigation.
The German prosecutor described the suspect as "a sex offender with several previous convictions, who has been convicted of sexual abuse of children, among other things." The prosecutor added he is already serving a long term in prison.
The suspect lived on and off in the Alrgave between 1995 and 2007 and is connected to the area of Praia da Luz where Madeleine was last seen by her mother, Kate McCann, who noticed the toddler vanished when she went to go check on her that evening, police said.
"While this male is a suspect we retain an open mind as to his involvement and this remains a missing person inquiry," Cranwell added.
Kate and Gerry McCann, Madeleine's parents, issued a statement about the developments through a family spokesperson.
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"We welcome the appeal today regarding the disappearance of our daughter, Madeleine," they said in a statement. "We would like to thank the police forces involved for their continued efforts in the search for Madeleine."
"All we have ever wanted is to find her, uncover the truth and bring those responsible to justice," the statement continued. "We will never give up hope of finding Madeleine alive but whatever the outcome may be, we need to know, as we need to find peace. ... We would like to thank the general public for their ongoing support and encourage anyone who has information directly related to the appeal, to contact the police."
Authorities are also releasing information on two vehicles the suspect had access to around the time of Madeleine's disappearance.
One is a "distinctive" early 1980s model VW T3 Westfalia campervan with a Portuguese registration plate. The suspect had access to this van from April 2007 until sometime after May 2007 and it was used in and around the area of the resort, police said.
Investigators believe the suspect was living in this van for days, possibly weeks, and may have been using the vehicle the day Madeleine went missing.
The second vehicle, a 1993 British Jaguar, model XJR 6 with a German license plate, was believed to have been seen in the area of the resort in 2006 and 2007 and was originally registered in the suspect's name, according to police.
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The vehicle was re-registered to someone else in Germany the day after Madeleine disappeared, but authorities believe the car was still in Portugal at the time.
Both vehicles are currently in the custody of German authorities.
Metropolitan Police are asking anyone who saw these vehicles together or individually during the spring or summer of 2007 to come forward.
Police are also looking for more information on two cellphone numbers, one of which was used by the suspect and the other used by what police believe is a "highly significant witness" and are asking that person to contact authorities.
"All we have ever wanted is to find her, uncover the truth and bring those responsible to justice," Stuart Cundy, deputy assistant commissioner for the Metropolitan Police, said in a statement. "We will never give up hope of finding Madeleine alive but whatever the outcome may be, we need to know, as we need to find peace."