B. Ramalinga Raju was arrested overnight after he surrendered to the police and was jailed on remand until January 23 by a judge in the southern city of Hyderabad, where Satyam is headquartered, court officials said.
The fallen chairman's brother, Rama Raju, who is a former Satyam director, was also jailed pending a full trial, they added.
Raju's lawyers said they would seek bail for the disgraced software tycoon whose admission to wrongdoing prompted a near collapse of Satyam, which boasts high-profile clients in 65 countries.
Raju has been charged with fraud following his admission that his firm's accounts and assets had been falsified over a period of several years, with profits inflated to the tune of more than one billion dollars.
Indian market regulator the Securities and Exchange Board of India (SEBI) is also seeking to question Raju, one of the pioneers of India's outsourcing boom and once the darling of international investment funds.
Satyam shares have gone into freefall, closing at 23.85 rupees on Friday compared to a value of around 180 rupees before the scandal erupted.
India's government has also stepped in, and on Friday booted out Satyam's directors' board saying it will name representatives to manage the affairs of the company.
Before being dismissed, the interim Satyam board had pledged to try and keep the company running and rectify the mistakes.
It had also insisted it was unaware of the scam, which has prompted comparisons with the collapse of US energy giant Enron and generated fears over the impact on foreign investment in Indian business and on corporate governance standards.
At least two US shareholder lawsuits have been filed against Satyam earlier this week.
The law firm of Izard Nobel filed a suit seeking a class action in New York on behalf of people who purchased the American Depositary Receipts of Satyam Computer between January 6, 2004 and January 6, 2009.
Another lawsuit was filed in New York by the firm Vianale and Vianale, based in Florida, a statement from the law firm said.
Indian market regulator Sebi meanwhile announced unprecedented steps to "boost investor confidence".
Independent auditors will now scrutinise the last quarterly results and audited annual financial statements of companies which are listed on exchanges and form part of India's key benchmark indices, the 30-share Sensex and 50-share Nifty, the regulator said.
"This exercise will be undertaken after the third quarter results and is expected to be completed by end of February this year," an official statement said.
India's third quarter corporate earnings announcements commence with India's second largest software exporter Infosys Technologies on January 13.
Some companies which do not form part of major indices would also be reviewed, Sebi said.
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