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".
Other charges relate to contracts at a 2009 event in London which marked the start of a baton race across Commonwealth countries, say reports.
Mr Kalmadi is expected to appear in court on Tuesday. If found guilty he could face years in prison.
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