Gopal Sharma, the region's police chief, identified the arrested man as Mudasir Gujari, and said he was a senior leader of Lashkar-e-Taiba, a militant group based in Pakistan.
Indian authorities suspect that the group was also be behind last week's railway blasts in Mumbai that killed more than 180 people.
Sharma told a news conference on Saturday that Gujari was "the main criminal" behind 25 grenade and other attacks over the past few months in Indian Kashmir.
Gujari is accused of distributing grenades and personally taking part in the attacks, allegedly taking orders from a commander in Pakistan.
Among the bombings was a string of grenade attacks in Kashmir's summer capital Srinagar on July 11 that killed more than a dozen people, including eight Indian tourists.
Lashkar-e-Taiba has condemned the attacks on the tourists and the Mumbai bombings and denied any responsibility for them.
A resident of south Kashmir, Gujuri, who goes by the alias Raju, had carried a reward of $10,700 for his capture.
Police also accused Gujari of involvement in a May 21 attack on a Congress party rally in Srinagar in which seven people died.
An official count shows the conflict in Kashmir has so far left more than 44,000 people dead, but separatist groups say the toll is actually more than double that.