James Dalamangas was taken into custody on Sunday in the Peloponnesian town of Aigio, according to local media reports.
The 55-year-old had been living under a pseudonym in Greece since a warrant was issued for his arrest over the death of father-of-two George Giannopolous, who was fatally stabbed on Anzac Day in 1999 after intervening in a fight at a suburban Sydney night club.
NSW Police have said they are "encouraged" by the reports and are working with Hellenic police.
The underworld figure has evaded Australian authorities for decades.
Police had tried to extradite him in 2003 and attempts to prosecute him by their Greek counterparts were suspended in 2007.
A $200,000 reward was also offered for information leading to his arrest and in 2024 Australian authorities and Mr Giannopolous's family made a last-ditch plea for help as the 25-year-long Greek statute of limitations neared its end.
His sister Toula Giannopolous believed people in Australia and in Greece had been helping keep Dalamangas under cover.
According to Greek Reporter, Dalamangas remained undetected by assuming the alias Anthonios Tzimas and living in a house surrounded by high walls and guard dogs.
His father and partner have also been taken into custody, accused of harbouring a criminal, Tempo24 reported.
Australian authorities are expected to apply for his extradition.
Dalamangas's brother Peter died in 1998 after being held to the ground by up to seven security officers during an altercation at Sydney's Star City casino.
A magistrate described the now-fugitive as the "catalyst" for the brawl, in which he was also injured.
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