Over 40 cannabis plants and various other drugs-related paraphernalia were found at a property at William Street in Donaghcloney on Saturday.
Acting on information supplied by members of the local community, officers arrested the occupant of the house during the raid.
The man is suspected of a number of drugs offences, including possession of a class B drug with intent to supply.
He is currently in police custody.
Area Commander, Chief Inspector Anthony McNally said: "Officers have been working with the local community in the Craigavon area to tackle the issue of drug supply and distribution.
"The discovery of this cannabis factory is an indication of our commitment to remove drugs from circulation.
"This is an example of how our work with communities can help to reduce the threat posed by drugs."
Chief Insp McNally appealed to the community to continue to contact police with any information relating to drugs.
Elsewhere a 28-year-old man has been charged with drugs offences after cannabis was found at a flat in the Rath Cuain area of Warrenpoint in Co Down on Saturday.
He is due to appear at Newry Magistrates' Court on Monday.