Denise Govendir, 53, was killed in a home invasion at Dover Heights, in Sydney's east, early on March 10, 1998.
More than a quarter of a century later, authorities arrested her husband Aaron Govendir at Springwood Police Station in the Blue Mountains on Thursday.
The 81-year-old was subsequently charged with murder and refused bail to appear in Penrith Local Court later in the day.
Govendir previously told investigators the couple was assaulted by a man who broke into their home claiming to be a police officer.
He said he was knocked unconscious before being restrained with cable ties.
The alleged intruder reportedly assaulted Ms Govendir, who died from her injuries.
Police recovered a stolen sedan the purported attacker fled the scene in 11 days after the killing, but were not able to track down the unidentified assailant.
Detectives on Thursday said they would now allege Govendir made up the story about a home invasion.
Tahli Govendir says she remembers her mother for her generosity, love and support. (Esther Linder/AAP PHOTOS)
An inquest held between 2005 and 2008 declared Ms Govendir died from blunt-force head injuries that were intentionally inflicted.
The NSW government in November 2023 announced a $1 million reward for fresh information that could lead to her killer's arrest and conviction.
Speaking at the time, Ms Govendir's daughter Tahli remembered her mother's generosity, love and support.
"How she died was only a tiny little bit of her and that's not the part that I focus on," she said.
"I still have people who say, 'I remember her, I miss her, I think about her all the time'."
Police are expected to provide an update on the investigation on Thursday afternoon.
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