James Dalamangas was arrested in Greece on June 7 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 George Giannopolous.
The father-of-two was fatally stabbed on Anzac Day in 1999 after intervening in a fight at a suburban Sydney nightclub.
NSW Police said they were aware Greek authorities would refuse a request from Australian police to extradite Dalamangas because the alleged crime falls outside Greece's statute of limitations.
"James Dalamangas remains one of Australia's most wanted," a NSW Police spokesman said in a statement.
"He is subject to an active arrest warrant in New South Wales for the murder of George Giannopoulos, who was fatally stabbed in Sydney in 1999.
"NSW Police Force maintains its unwavering stance that geographic borders should not serve as a barrier to accountability for violent crimes."
The spokesman said NSW Police would continue to explore every avenue for his extradition with the AFP, federal attorney-general, and international partners.
Dalamangas, a significant underworld figure, has evaded Australian authorities for decades.
Police first tried to extradite him to Australia in 2003, and attempts to prosecute him by their Greek counterparts were suspended in 2007.
A $200,000 reward was offered for information leading to his arrest.
In 2024, Australian authorities and Mr Giannopolous's family made a last-ditch plea for help as the 25-year Greek statute of limitations neared its end.
"Our detectives remain in close contact with the Giannopoulos family," NSW Police said.
"We are deeply committed to supporting them and will not cease in our efforts to seek long-awaited justice for George."
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.
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