Dimitris Koufodinas, 44, considered to be one of the leaders of November 17, has been arrested and is being questioned by the prosecutor responsible for investigating terrorism, police said.
He is wanted in connection with the killing of 23 people, including British, American and Turkish diplomats, since 1975 - mainly in bomb attacks.
Fifteen suspected members of the group have been arrested and charged since a bungled bomb attack injured one of its alleged gunmen in late June.
The group was regarded as the biggest threat to the 2004 Athens Olympic Games.
"The arrest is definitely very important", Greek government spokesman Christos Protopapas said.
Most wanted
Until June, police had failed to arrest any November 17 members.
But the failed bomb attack in the port of Piraeus led to the arrest of Savas Xiros - allegedly injured by his own bomb - and a nationwide manhunt for Mr Koufodinas began a few days later.
Police launched raids throughout the country and rounded up a number of suspected members of the group who are now in custody awaiting trial.
Dimitris Koufodinas is believed to have been in charge of November 17's operations and to have acted as a link between the organisation's leadership and its armed wing.
He is alleged to have taken part in several attacks - for which he has been charged in absentia - including the killing of British military attache Stephen Saunders in central Athens in June 2000.
November 17, named after the date of a violent Athens student uprising against the military junta in 1973, emerged in 1975 with the murder of Athens CIA chief Richard Welch.