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| Suresh Kalmadi |
Suresh Kalmadi was removed from his post in January.
Police say he will be charged with conspiracy regarding the awarding of commercial contracts for the Games - he denies any wrongdoing.
The build-up to the Games, held in the capital in October, was marred by allegations of sleaze and incompetence.
A spokesman for India's Central Bureau of Investigation (CBI) said Mr Kalmadi was arrested "for conspiracy to cause favour to a company in Switzerland while procuring timers and scoring equipment for the Games".
Mr Kalmadi is expected to appear in court on Tuesday. Correspondents say that if he is found guilty, he could face years in prison.
Money misappropriatedIn February, organising committee Secretary General Lalit Bhanot and another top official, VK Verma, were arrested and accused of financial irregularities linked to the Games.
The Games cost several billion dollars to stage. But correspondents say that far from showcasing the best of India, they were damaged by delays, shoddy building work and persistent allegations of widespread corruption.
The budget for the event ballooned to an estimated $6bn (£3.87bn) - with India's federal corruption commission receiving complaints alleging that up to $1.8bn (£1.08bn) of Games money was misappropriated.
The row over corruption at the Games is one of a series of corruption scandals that has rocked India in recent months.
Some of the recent corruption scandals to have angered Indians include a multi-billion dollar alleged telecoms scam and allegations that houses for war widows were diverted to civil servants.
Earlier ths year, the head of the country's anti-corruption watchdog was forced to resign by the Supreme Court on the grounds that he himself faced corruption charges.
The scandals prompted renknowned Indian social activist Anna Hazare to go on a four-day-long hunger strike to push for stringent new anti-corruption laws.
There were demonstrations across India in support of his call and the government eventally agreed to his demands.
