Kathlyn Dunn (28) was arrested at Lombok's airport after arriving on a flight from Singapore on Thursday, provincial police detective chief Ricky Simon Paays told reporters.
"X-ray screening at the airport found suspicious materials inside the suspect's suitcase. Two packages containing methamphetamine were later found in the lining of her suitcase," Paays said, adding that the offence could carry a death penalty.
Indonesia enforces stiff penalties, including life imprisonment and death, for drug trafficking.
Two members of an Australian drug smuggling gang known as the "Bali Nine", who were arrested in 2005, are on death row, while seven others face lengthy jail terms.
Another Australian, Schapelle Corby, who was sentenced to 20 years in prison for smuggling 4.1kg of marijuana in 2005, recently had her term slashed by five years after a clemency appeal to President Susilo Bambang Yudhoyono. – Sapa-AFP