Halfon, 31, is suspected of involvement in the smuggling into Israel of five kg of cocaine, said an Israeli police spokeswoman on Wednesday.
She said another Israeli national had been arrested on arrival at Ben-Gurion International Airport near Tel Aviv on Monday with the narcotics allegedly hidden in two suitcases.
Halfon, who made the last of his 38 appearances for his country in 1999, will appear before a magistrate on Thursday as the police seek to extend his remand.
Halfon’s attorney said the soccer star was denying his involvement.
His club said they had heard about the arrest but refused to comment on the allegations.