News agency reports said several students were wounded by gunfire in the raid on the school, run by nuns on the outskirts of the Timorese capital Dili. The attack was the first against a Catholic institution since Indonesia occupied the former Portuguese colony in 1975 after a military coup the year before had thrown Portugal into turmoil.
There have been clashes between Catholic and Muslim students at the territory's university. Most East Timorese are Catholic and the Indonesian population is mainly Muslim.
The troops arrested mostly male students and took them away in military trucks to an unknown destination. Reports said troops fired as they entered the school, wounding several of the students.
The raid followed several days of military activity in Dili with troops making house-to-house searches and arresting a number of young people, including the youth leader Aleixo da Silva, known as Cobra.
In the attack on the school, the troops forced their way in and rounded up the students, beating them in front of the nuns before taking them off to the waiting trucks.
The headteacher, Sister Zulmira, is the sister of the territory's Jakarta-appointed governor, Abilio Jose Osorio Soares. Earlier, Governor Soares had called in troops to try to stop fighting among groups of Timorese youths in Dili.
Although Indonesia calls East Timor its 27th province, the United Nations continues to recognise Portugal as the administrative power.