Symphorien Mutombo Bakafwa, DR Congo's justice minister, said that Ngudjolo, believed to be 37-years old, was arrested in the capital on suspicion of war crimes and crimes against humanity.
Fatou Besouda, the court's deputy prosecutor, said that "hundreds were killed, maimed or terrorised" during the operation.
"Women were forced to become sexual slaves. The village was pillaged by FNI forces and razed to the ground."
The prosecution alleges that Ngudjolo, as the highest-ranking FNI commander, played "an essential role in designing and implementing an indiscriminate attack against the village ... on or around 24 February 2003".
About 200 civilians were murdered, while others were tortured, imprisoned in a room filled with corpses, or used as sex slaves, according to the arrest warrant.
Nine counts of war crimes and crimes against humanity, including the use of child soldiers, were listed on the warrant.
Investigations into the DR Congo began in June 2004 after the Congolese government referred the situation in the country to the ICC.
Moreno-Ocampo said his team will now turn its attention to the eastern provinces of North and South Kivu, where "there are clear reports of serious crimes being committed even today".
"There will be no impunity for the worst perpetrators of the worst crimes in the DR Congo," he said.
Since 1999, clashes between factions and tribal killings have claimed at least 60,000 lives in mineral-rich Ituri, which borders Uganda.
A further 600,000 people have been displaced, according to aid agencies.