The boy was pulled over in Broken Hill in the New South Wales (NSW) outback after a patrol noticed the car's bumper dragging on the ground.
Police said the boy had been attempting to drive 4,000 km from Kendall in New South Wales to Perth, Western Australia.
Local media reported that the boy managed to evade suspicion partly because he looks much older.
The manager of a petrol station in the town of Cobar was quoted as saying that he looked "maybe 19 or 20". Police also said the boy was "about six foot tall".
"He'd taken the family car," Detective Inspector Kim Fehon was quoted as saying by the Australian Associated Press news agency.
The boy had seemingly driven across the entire state of New South Wales, after setting off from Kendall near Port Macquarie on the east coast.
"Officers from Broken Hill Highway Patrol stopped a motor vehicle on the Barrier Highway due to defects which made the vehicle hazardous," the spokesperson said.
"Checks revealed the driver to be a 12-year-old boy travelling from Kendall NSW on his way to Perth," the spokesperson said. The boy was arrested and taken to Broken Hill police station.