Darren Rispen, 42, has been picked up in Nelson Bay, near Port Stephens, after being on the run since October 2014.
He skipped bail while facing 26 drug-related offences, seven of which were for commercial supply.
Rispen was one of 19 wanted people listed by CrimeStoppers under Operation Roam.
Rispen had been on $200,000 bail after being arrested in July 2014 on charges of money laundering and of being part of a criminal network in relation to the purchase of a plane allegedly used to import drugs.
He was granted bail on October 2 and released on October 15 after raising another $500,000 surety. He reported to Campbellltown police station daily for just over a week before disappearing.
Police said Rispen left a property in Nelson Bay about 11am this morning with a woman.
He was taken to Raymond Terrace Police Station, where he will be charged with the arrest warrant. It is expected he will appear at court later today.He parked in the centre of town and when police approached he allegedly ran. Officers from the Middle Eastern Organised Crime Squad caught him and arrested him about 11.30am
A police source said Rispen had grown a large beard and dramatically altered his appearance in order to avoid police detection.
It is understood the young woman he was with did not know of his alleged criminal history.
His arrest follows the unrelated capture of another of Australia’s most wanted fugitives at Windsor Sydney’s west over the weekend.
Rispen had been living in a rented property in Nelson Bay, a far cry from the $1200-a-week Sydney apartment he enjoyed prior to his arrest in 2014.
The alleged drug lord also drove expensive cars and dined regularly at The Star casino, where he played in poker tournaments.
But his luck ran out when he was charged with money-laundering and directing a criminal group linked to a major international crime syndicate to import guns and drugs for distribution in southwest Sydney in 2014.
His assets were frozen and when he was arrested again — two months later after police uncovered meth labs and hydroponic cannabis operations he was allegedly behind — the 40-year-old was living in a caravan at Campbelltown.