NSW Police confirmed Peters - who disembowelled his male victims and flushed their organs down the toilet - was arrested in Petersham, in Sydney’s inner west, on Monday afternoon.
The Sydney Morning Herald reports that Peters appeared to be bound for popular gay nightspot the Stonewall Hotel on Oxford Street when he was caught.
The club’s manager confirmed he was seen at the club on Saturday and Sunday night.
“He was asked to leave both times,” she told the newspaper.
Although unaware of his shocking criminal history, the manager felt he had drunk too much to be allowed back on the premises.
“He left straight away,” she said.
“We didn’t even get one look and he was gone”.
Police confirmed that Peters admitted to the POW Hospital after residents at his halfway house called an ambulance over concerns for his welfare.
“He was there for less than two hours,” the police spokesperson told news.com.au.
Peters has been on parole since November 2016, with a State Parole Authority spokeswoman said the decision to grant parole was justified.
“(The authority) took into account his completion of relevant programs and counselling, his participation in external works release and day release programs, the offender’s behaviour in prison and his minimum-security prison classification,” she said.
Peters pleaded guilty to murdering and disembowelling two of his male lovers, Andrei Akai and Bevan Frost, months apart in his Surry Hills housing commission apartment in 2001.
He was jailed for 21 years with a non-parole period of 13 years, in 2002. He was released on parole in November 2016.