The man is said to have walked into Café Marco on Burwood Road yesterday wearing surf shorts and a vest and carrying a suitcase.
But detectives said he “seemed to get spooked” and ran out of the café a few moments later.
Staff found the man’s behaviour odd and opened the case to find what police described as “a significant amount of cash”.
The suitcase contained around $1m – around £630,000 – in $50 notes.
The man, who is reported to be 49-years-old and from Hong Kong, was picked up by police after he was seen acting suspiciously.
The man became ill while he was in custody and was taken to Concord Hospital under police guard for an unknown pre-existing condition.
This is the second time this year police have been alerted to bags stuffed with large amounts of cash.
Two men – Li Want, 26 and Yu Xiang, 25 – pleaded guilty to dealing with property suspected as the proceeds of crime after they allegedly carried suitcases filled with $2 million in cash into Central Station in April.
Police expect to charge the man now in custody with several offences linked to the cash.