We don't know exactly what his military rank was among the Romans, or what exactly he did. The historian Valleius Paterculus (2.118) simply says he attained Roman citizenship and the rank of equestrian. He had grown up in Rome as a hostage, which should not be understood in the modern sense. In order to secure cooperation for treaties and whatnot, the ancient Germans, Gauls, Romans, and others regularly demanded hostages, typically the sons of elite players. Those "honored guests" would grow up among their captors, sometimes for years, as seems to have been the case here. Upon manhood, Arminius entered Roman military service, possibly under the patronage of his captor family. We probably should not assume he "worked his way up the chain" from a lower-tier centurion—he didn't have enough time, as he only served 1-6 CE. It seems as if he might have been a prefect, by appointment, which would have indicated his equestrian status. The whole situation is a little unclear, and it is unclear why any Roman would seek to appoint a German captive as a prefect, no matter how gifted he might have seemed.

A prefect in an early Imperial army was of significant rank, equal to or greater than the primuspilus (chief centurion) as far as respect demanded in the command tent. There were different types of prefects, especially in the somewhat muddy practices of the early Augustan legions, but all of them were of considerable rank. Note that no ancient source calls him praefectus. That is just what we often assume given what little info we have.