Malka Leifer has been arrested in Israel.

Alleged Australian paedophile Malka Leifer, a former school principal facing 74 charges of child sex abuse, has been arrested in Israel after a decade of fighting extradition.

Israeli authorities have accused Leifer of faking a mental illness in order to avoid returning to Australia.

Leifer fled to Israel in 2008 when allegations she had sexually abused girls at the ultra-orthodox Adass Israel School in Elsternwick, Melbourne, where she was principal, were first raised. She is wanted by Victoria Police on 74 counts of sexual assault and rape involving girls.

FAIRFAX MEDIA Adass Israel Girls School in Elsternwick.

The 50-year-old was arrested by Israel police in 2014 when Australia applied for her extradition, but proceedings were dropped when a psychiatrist found Leifer was unfit to stand trial.

READ MORE: Former Australian principal accused of 74 child sex charges

She was released from her house arrest and ordered psychiatric treatment in Jerusalem.

Israel police re-arrested Leifer on Monday in the northern West Bank on suspicion of obstructing court proceedings and attempting to hide evidence in a case.

"A police undercover investigation has been underway for a month, following an Interpol request to investigate the suspect," a statement translated by the ABC reads.

"During 2017 there were indications that the suspect was pretending to be suffering from mental illness in order to avoid the extradition process."

"The female suspect will be brought to the Petak Tikva Magistrates Court to extend her detention."

An alleged victim of Leifer's successfully sued the former principal in the Supreme Court of Victoria in 2015 and was awarded $1.27 million in compensation.

The court heard the 28-year-old was sexually abused between 2003 and 2006 by Leifer when she was headmistress of the girls school.

The woman was allegedly abused at school, on camp and at Leifer's home.

The former principal fled to Israel with her family in the middle of the night days before the allegations surfaced, allegedly with the help of senior members of Melbourne's secretive Adass community.

Alleged victim Dassi Erlich said she welcomed the arrest with a "mixture of elation and relief coupled with anticipation towards the future".

"We see this as a very important breakthrough in our long journey to achieve justice," she said.

Erlich said she was heartened by the empathy conveyed by people "across the full spectrum of society".

"It has been a very long 10 years since Malka Leifer fled Australia. We are hopeful that this is a turning point in the extradition process."

Jewish child sexual abuse advocacy organisation Kol v'Oz said it was pleased the judicial process could recommence.

"I'm delighted to hear of Malka Leifer's arrest and hope that it is the re-commencement of a process that leads to her extradition to Australia to face her accusers," Kol v'Oz CEO Manny Waks wrote in a statement.

"Her arrest is a credit to the many people who have worked tirelessly to ensure that she will be held to account and can no longer be a potential threat to children in Israel.

"I'm especially happy for her courageous alleged victims."