Rocco Morabito, who was described as a member of the 'Ndrangheta, the Calabrian mafia, has been wanted since 1995 on charges of belonging to a criminal organization devoted to international drug trafficking, the ministry said in a statement.
The statement alleges that Morabito transported drugs within Italy for sale in Milan and attempted to import hundreds of kilos of cocaine from Brazil in 1992 and 1993.
The Italian Interior Ministry said Morabito was at the top of its list of wanted mafiosos.
It said he was a member of the 'Ndrangheta and one of the top leaders of the “Africo Nuovo” clan.
The Uruguayan statement said Morabito had been living in Punta del Este, a Uruguayan seaside resort, for 11 years and was discovered after enrolling his daughter in school under his own name.
A six-month-long investigation found that he had obtained Uruguayan papers after presenting a Brazilian passport in the name of Francisco Capeletto.
After arresting him and his wife, police seized a pistol, 13 mobile telephones, 12 bank cards, two cars, a Portuguese passport, jewels and checkbooks denominated in dollars.
Pending an Italian extradition request, Morabito will be incarcerated in Uruguay for holding false papers and identity theft, the ministry said.
Police regularly detain members of Italy's mafia abroad, and in July this year 13 were arrested in Barcelona as part of a major Europe-wide operation.
Other members of the southern Italian organized crime groups have been captured after letting their guard down on holiday; in August 2015, one boss of a Camorra clan was caught unarmed while sunbathing on a beach near Rome.
The same month, police nabbed another wanted mafia boss on a family holiday in Benidorm. Officers gained access to the suite where Salvatore Mariano, a member of Naples' Camorra mafia, was staying with his wife and children, by posing as hotel staff bringing him room service.
In other cases meanwhile, police just had to follow their noses.
One suspected member of the Camorra, Pasquale Brunese, was tracked down in a Spanish pizzeria where he had been working as a waiter.
And in May 2016, pizza led police to a member of the 'Ndrangheta, Rocco Gasperoni, who had made a name for himself as a star pizza-chef in a Dutch seaside town during his 15 years on the run.