Ms Leifer is accused of sexually abusing several pupils while she was a teacher and principal at the Adass Israel girls school in Melbourne.
Israeli Police spokesman Micky Rosenfeld told reporters that Ms Leifer was arrested on Tuesday morning.
"This time we have definitely got our hands on her ... The new procedure of having her extradited has just begun again."
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In 2016 court proceedings, Ms Leifter avoided extradition to face charges in Victoria, claiming she was mentally unfit.
But Superintendent Rosenfeld said new evidence from a month-long undercover operation showed she obstructed court proceedings, hid evidence and faked illness.
Abuse survivor Dassi Elrich told SBS News that Ms Leifer's extradition proceedings can't come sooner.
"Knowing that she is in custody is a huge relief for us because we know that she is no longer, at this moment, able to harm anyone and we hope that it stays that way," Ms Elrich said.
Ms Elrich started the #BringLeiferBack campaign last year. She met with Prime Minister Malcolm Turnbull who discussed Ms Leifer's extradition with the Israeli Prime Minister during a state visit in October.
Ms Elrich's sisters Elly Sapper and Nicole Meyer are also survivors and campaigners.
Ms Sapper said "the process of healing is a long one and may be forever", adding that the extradition process is "a step toward the healing process".
Ms Meyer said "it just comes down to seeing her in court, facing her crimes and being given the correct consequences for that. So on behalf of all victims of her, victims who haven't come forward, can feel some measure of relief and closure as well".
Attorney general Christian Porter also welcomed the news.
"The investigation conducted by Israel, which we are now aware of, offers us a path through - a potential path through - these extradition proceedings so it is a very positive development."
Additional reporting: AAP
