The man, named by local police as Simon Peter Carman, was arrested at Bangkok's main international airport on Friday evening while allegedly attempting to leave the country on a Jetstar flight to Perth.
He was detained after the body of the teenager was found in a black suitcase next to a railway in the resort town of Pattaya, according to local media.
The man denied involvement initially, according to The Pattaya News, but later claimed to have acted in self-defence when the teenager allegedly threatened him with a kitchen knife during an argument.
In footage recorded by police, Carman expressed regret to the girl's family while also denying he killed the 17-year-old.
"I feel bad for what happened to your daughter - it was out of my control," he said.
"It shouldn't happen. Please tell other girls just to be careful."
Thai and Australian outlets have identified the man as a 46-year-old from Ballarat.
CCTV footage published by local media shows the pair entering a residential complex in the early hours of June 25.
Camera footage also appears to show the man leaving the residential building alone later that night, with a large black suitcase, and driving away with it on a motorbike.
Police later found the suitcase near a railway roughly 4km away, media reported.
The naked body of the teenager was found inside and she had injuries consistent with an assault.
Video footage of the Australian shows visible scratch marks on his neck and arms.
The Department of Foreign Affairs and Trade confirmed it was providing consular assistance to an Australian detained in Thailand.
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