"Elections are no substitute for the aspirations of the Kashmiri people and for the resolution of the dispute," Mirwaiz Umar Farooq, chairman of the alliance, said in a statement.
Farooq and Syed Ali Geelani, another separatist leader, were detained in their residences in Srinagar.
The detained leaders had planned to address anti-election rallies in Srinagar and other towns in Indian-administered Kashmir on Friday.
The homes of Yasin Malik, Javed Mir and Nayeem Khan, other high-profile separatist leaders, were also ringed by police and the occupants told not to leave.
"They are not allowing me to move out of my house," Malik said.
"It is undemocratic to stop people from running a poll boycott campaign."
India's general election began last week, but voting in the Kashmir valley has been split into three phases starting from April 30.
The staggered voting is to allow thousands of security forces to move around Kashmir.
"Elections in the presence of 700,000 Indian troops is itself a dispute. I appeal to people to stay away from polls," Farooq said.
A 20-year-old separatist revolt has killed tens of thousands of people in Kashmir, the cause of two of three wars between Indian and Pakistan.