Victoria Police, along with the Australian Crime Commission (ACC), executed search warrants at 14 properties in inner and western suburbs from 5am (AEST) on Thursday.
Police say they have taken possession of heroin believed to have a street value of several million dollars and have seized around $20 million worth of residential and commercial real estate.
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Police raided properties in suburbs they raided including Fitzroy, Brunswick, St Albans, Maribyrnong, Footscray, Sunshine and Collingwood.
They say there is potential for further arrests and drug seizures.
The raids capped off a 10-month operation - one of the largest of its type - investigating a suspected organised crime syndicate involved in importing and distributing drugs.
The 12 people arrested - nine men and three women - are aged between 25 and 60.
Head of the Victoria Police Drug Task Force, Detective Inspector John Potter, said the arrests highlight the effectiveness of multi-agency cooperation.
"As a result of this joint operation we believe we have been able to disrupt the activities of a significant drug and organised crime syndicate operating in our state," Det Insp Potter said.
"Operations such as this should send a clear message to crime syndicates that Australian law enforcement is working together and will target anyone who thinks they can break our laws.
"These joint operations have proven to be an incredibly powerful and efficient way of tackling the activities of criminal networks."
