Milat quickly became a suspect. Police learned he had served prison time and in 1971 had been charged with the abduction of two women and the rape of one of them, although the charges were later dropped. It was also learned that both he and his brother Richard worked together on road gangs along the highway between Sydney and Melbourne, that he owned a property in the vicinity of Belanglo, and had sold a Nissan Patrol four-wheel drive vehicle shortly after the discovery of the bodies of Clarke and Walters. Acquaintances also told police about Milat's obsession with weapons. When the connection between Onions and the Belanglo murders was finally made, Onions was asked to fly to Australia to help with the investigation.
On 5 May 1994, Onions positively identified Milat as the man who had picked him up and attempted to tie up and possibly shoot him. Milat was arrested on 22 May 1994 at his home at Cinnabar Street, Eagle Vale after 50 police officers surrounded the premises including heavily armed officers from the Tactical Operations Unit. Homes belonging to his brothers Richard, Alex, Boris, Walter and Bill were also searched at the same time by over 300 police. The search of Ivan Milat's home revealed a cache of weapons, including parts of a .22 calibre rifle that matched the type used in the murders, plus clothing, camping equipment and cameras belonging to several of his victims.
Milat appeared in court on robbery and weapon charges on 23 May. He did not enter a plea. On 30 May, following continued police investigations, Milat was also charged with the murders of seven backpackers. At the beginning of February 1995, Milat was remanded in custody until June that same year. In March 1996, the trial finally opened. Milat's trial lasted fifteen weeks. His defence argued that in spite of the amount of evidence, there was no proof Ivan Milat was guilty and attempted to shift the blame to other members of his family, particularly Richard.
On 27 July 1996, a jury found Ivan Milat guilty of the murders. He was also convicted of the attempted murder, false imprisonment and robbery of Paul Onions, for which he received six years' jail each. For the murders of Caroline Clarke, Joanne Walters, Simone Schmidl, Anja Habschied, Gabor Neugebauer, James Gibson and Deborah Everist, Milat was given a life sentence on each count, with all sentences running consecutively and without the possibility of parole.
On his first day in Maitland Gaol, he was beaten by another inmate. Almost a year later, he made an escape attempt alongside convicted drug dealer and former Sydney councillor, George Savvas. Savvas was found hanged in his cell the next day and Milat was transferred to the maximum-security super prison in Goulburn, New South Wales.
Ivan Milat appealed against his convictions on the grounds that the quality of legal representation he received was too poor, and therefore constituted a breach of his common law right to legal representation, established in the landmark case of Dietrich v The Queen. However, Gleeson CJ, Meagher JA and Newman J of the NSW Court of Criminal Appeal held that the right to legal representation did not depend on any level or quality of representation, unless the quality of representation were so poor that the accused were no better off with it. The Court found that this was not the case, and therefore dismissed the appeal.
In 2004, Milat filed an application with the High Court which was heard by Justice David Hunt. The orders sought were that Milat be allowed to either attend to make oral submissions in an impending appeal for special leave to the court and that, alternatively, he be allowed to appear via video link. The application was dismissed on the grounds that the issues raised could be adequately addressed by written submission.
The grounds of his impending appeal were that the trial judge had erred by allowing the Crown to put a case to the jury unsupported by its own witnesses and had also put forward alternative cases to the jury, one of which had not been argued by the Crown. McHugh J indicated that this appeal may be defeated because it has been brought out of time.
On 26 January 2009, Milat cut off his little finger with a plastic knife, with the intention of mailing the severed digit to the High Court. He was taken to Goulburn Hospital under high security, however, on 27 January 2009, Milat was returned to prison after doctors decided surgery to reattach the finger was not possible.
This was not the first time Milat had injured himself while in prison. In the past, he swallowed razor blades, staples and other metal objects.
In 2011, Milat went on a hunger strike in an unsuccessful attempt to be given a PlayStation, losing 25 kilograms.
Copycat murder by Milat relative
In 2012, Ivan Milat's great nephew Matthew Milat and his friend Cohen Klein (both aged 19 at the time of their sentencing) were sentenced to 43 years and 32 years in prison respectively, for murdering David Auchterlonie on his 17th birthday with an axe at the Belanglo State Forest in 2010. Matthew Milat struck Auchterlonie with the double-headed axe as Klein recorded the attack with a mobile phone. This was the same forest where Ivan Milat had buried his victims.