Toledo, once hailed as an anti-corruption champion, is accused of taking a huge payoff from Brazilian construction firm Odebrecht in exchange for a massive highway contract connecting Peru and Brazil during his 2001-2006 presidency.
Peruvian police launched a manhunt for him after a judge ordered his arrest Thursday night. There is a $30,000 reward out for information leading to his capture.
Peruvian authorities believe Toledo, 70, is in the US city of San Francisco, where he is a visiting professor at nearby Stanford University.
The Peruvian government has indicated that Toledo might try to flee to Israel, where his wife, French-born Elaine Karp, is a citizen.
"We heard from a solid source that he was trying to flee to Israel. So we alerted Israel," Interior Minister Carlos Basombrio said on RPP Radio.
But Israel blocked any such effort by Toledo.
"Toledo will be allowed in Israel only when his affairs in Peru are settled," foreign ministry spokesman Emmanuel Nahshon said in a statement.
Peru's authorities have a warrant for Toledo to be detained and held in preventive custody for 18 months pending a full investigation.
He is accused of influence peddling and money laundering.
At the moment, Toledo could leave the United States, since the US has not yet received the documents on which the warrant is based, according to Basombrio.
Israel's foreign ministry later said he was not aboard a Sunday evening flight from San Francisco that landed at the country's main international airport.
Toledo denies the accusations against him, branding them political persecution. But he has struggled to explain the source of the money.