Four more people engaged in militancy and wanted by India are hiding in Bangladesh, police said.
Detective Branch officials led by Deputy Police Commissioner Monirul Islam identified Obaidullah on the basis of confessions made by Abdur Rauf Daud Merchant, another Dawood Ibrahim conduit who fled India during home leave after being convicted in the murder of Bollywood music baron Gulshan Kumar in 1997.
Merchant was nabbed in May while hiding in a village in eastern Bangladesh and has made confessions of his underworld and militant links in a court here.
Obaidullah confirmed what Merchant had earlier said about Dawood Ibrahim running a network of local agents that includes women.
Sources said Mufti Obaidullah has a PhD degree on fatwa (religious edict) from Darul Uloom, the international centre of Islamic theology in India's Uttar Pradesh state.
While hiding in Bangladesh under assumed name Abu Zafar, he was a teacher at Jamiatul Sunnah Madrasa at Shibchar upazila in Madaripur since 2003. He had taken up jobs as a religious teacher at different seminaries Bangladesh during his stay.