OpenSSH 4.9+ includes a built-in chroot for sftp, but requires a few tweaks to the normal install.
This package is available in the core repository. To install it, run
# pacman -S openssh
In /etc/ssh/sshd_config, modify the Subsystem line for sftp:
Subsystem sftp internal-sftp
At the end of the file, add something similar to the following for a group:
Match Group sftpusers ChrootDirectory %h ForceCommand internal-sftp AllowTcpForwarding no
Or for a user:
Match User username ChrootDirectory %h ForceCommand internal-sftp
The %h represents the users home directory.
# /etc/rc.d/sshd restart
Adding new chrooted users
If using the group method above, ensure all sftp users are put in the appropriate group, i.e.:
usermod -g sftpusers
Also, set their shell to /bin/false to prevent a normal ssh login:
usermod -s /bin/false
Note that since this is only for sftp, a proper chroot environment with a shell and /dev/* doesn't need to be created.
Their chroot will be the same as their home directory. The permissions are not the same as a normal home, though. Their home directory must be owned as root and not writable by another user or group. This includes the path leading to the directory. My recommendation is to use /usr/local/chroot as a root and build the home directories under that.
Testing your chroot
# ssh username@localhost
should refuse the connection or fail on login. The response varies, possibly due to the version of OpenSSH used.
# sftp username@localhost
should place you in the chroot'd environment.
sshd will reject sftp connections to accounts that are set to chroot into any directory that has ownership/permissions that sshd doesn't consider secure. sshd's apparently strict ownership/permissions requirements dictate that every directory in the chroot path must be owned by root and only writable for the owner. So, for example, if the chroot environment is in a user's home directory both /home and /home/username must be owned by root (group ownership doesn't seem to matter) and have permissions along the lines of 700 or 755 (775 won't work for example since it's group writable).