Rajendra Nikalje, widely known as Chhota Rajan, has been on Interpol's wanted list since 1995 for running a crime syndicate that engaged in extortion, arms smuggling and contract killing.
Indian minister brags about ‘covert op’
"We tracked Chhota Rajan's movements closely and informed the police in Indonesia and Australia," said Anil Sinha, director of the Central Bureau of Investigation in the Indian capital.
"Eventually the Indonesian police managed to arrest him. We are making arrangements to bring him to India and pursue all criminal cases against him."
Gangsters like Nikalje, who operated in the financial capital, Mumbai, have long drawn attention in India, with their exploits featuring in Bollywood films and newspaper articles.
His arrest comes as Prime Minister Narendra Modi's government ratchets up diplomatic pressure on neighbour and arch-rival Pakistan to hand over his former partner Dawood Ibrahim, suspected of militant links.
India's top court dismisses last-ditch appeal of 1993 Mumbai bombings death-row convict
Ibrahim is alleged to have masterminded India's deadliest bombings, which killed at least 250 people and wounded more than 700 in Mumbai in 1993.
Indian authorities say they have shared evidence of Ibrahim's whereabouts with Pakistan, which rejects India's claim that he is living there.
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