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Zagaria, 53, was apprehended by the Naples and Caserta Flying Squad, after 16 years on the run.
"You won. The state has won," Zagaria reportedly said during his arrest.
Zagaria had been hiding in a bunker with a ceiling of reinforced concrete under a home on Via Mascagni, in the town of Casapesenna.
Described as the leader of the powerful Casalesi clan, which is involved in drug trafficking and corruption in the construction industry, Zagaria has been sentenced in absentia to multiple life terms, the Times of Malta reported.
An international arrest warrant was issued for Zagaria in 2000.
A total of 47 arrests were reportedly carried out Tuesday in a crackdown on the Casalesi clan.
In 2010, police arrested Antonio "the Baby" Iovine, a leader of the Casalesi, after 14 years on the run.