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German prosecutors first named Christian Brueckner a suspect in 2020, when he was already serving the sentence for raping a 72-year-old woman in part of Portugal’s Algarve region where McCann went missing.
He will be electronically tagged, must declare a place of residence and cannot leave without permission.
Brueckner’s lawyer denies any connection with the McCann case.
Brueckner has convictions for child abuse and drug trafficking in addition to the rape of the woman, who has since died.
Police in Britain, Germany and Portugal, who have identified Brueckner as their main suspect, have long sought evidence to link him conclusively to the case.
Portuguese and German police spent four days digging for evidence in the Algarve in June.
British police said on Monday Brueckner, who is detained in a prison in Sehnde in northern Germany, declined their request for an interview in connection with the disappearance.
They said they would continue to pursue any viable lines of enquiry.
McCann, then aged three, disappeared from her bedroom in a holiday resort as her parents dined metres away.
Brueckner, 49, lived in the Algarve between 1995 and 2007, where, according to court documents seen by Reuters he burgled hotels and holiday flats.
McCann’s parents continue to campaign for their daughter, who would now be 22, to be found and issue a statement each year on the anniversary of her disappearance.
“We love her dearly and miss her beyond words,” they wrote on their website.