Scott Miller, 45, and an accomplice were arrested in police raids in two Sydney suburbs.
They were charged with the alleged supply of some AU$2.0 million (US$1.6 million) worth of methylamphetamine, also known as ice, concealed inside candles, they said.
Police also seized a kilogramme (2.2 pounds) of heroin, other drugs and cash in the raids.
A spokesman described Miller as the head of a “criminal syndicate” that sold ice across New South Wales state, and said investigations were continuing and further charges expected.
Miller won a silver medal in the 100-metre butterfly event in the 1996 Atlanta Olympics, and a bronze medal as part of Australia’s 4×100-metre medley squad.
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