Pandi, 40, was eluding arrest since the murder of "Pottu" Suresh, Alagiri's close aide, on January 31, 2013.
Pandi was arrested from outside Kapil Bar in Navi Mumbai's Vashi and produced before a local court which granted transit remand till September 26, a police official told PTI.
Navi Mumbai police rendered necessary assistance to their Madurai counterparts in the operation, the official said.
Pandi, a former DMK member, was on the run since Suresh's murder in Madurai. An armed gang hacked Suresh to death after waylaying him while he was returning home in his car.
Several criminal cases, including kidnapping, attempt to murder and land-grabbing, are pending against him.