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Police were tipped off to the presence of Manish, 34, a history-sheeter, at Rohini.
They intercepted a car in which Manish and his associate Tinku were travelling and arrested them, said Deputy Commissioner of Police (Crime) Vichitra Veer.
Around 1.3 kg of fine-quality heroin, worth around Rs 2 crore in the international market, was recovered from the two, he said.
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After his release in 2019, he got involved in gambling. Having suffered losses, he started selling psychotropic substances in Delhi-NCR, said Veer.
The second accused, Tinku, 34, is a resident of Shahdara and a childhood friend of Manish. He was earlier arrested in a case under the Excise Act.
Tinku assisted Manish in selling drugs in Delhi-NCR, the police added.