The flag was allegedly raised by a group of students in Surabaya. They were arrested and manhandled by the local police. Witnesses said they were carrying the Morning Star, the Papuan flag.
The authorities also accused the 43 students of damaging some national symbols during a protest.
National Police Chief General (Pol) Tito Karnavian, instructed the Jakarta Police Chief, to catch anyone who raises the Morning Star flag.
The instructions are not for those in Papua only, but for anyone raising the Morning Star flag across the country.
Such an incident also occurred when Papuan college students held a demonstration on Jalan Merdeka Utara, Central Jakarta.
Emboldened Papuan students demonstrated and raised the morning star before the state palace, demanding a referendum on the province.
The students want self-determination for their province and protests are spreading after news of casualties in such protests in Papua.
The Jakarta Post reports that hundreds of Papuan students had taken to the streets in Central Jakarta following similar protests in the highlands of Papua earlier this week.
This brought the authorities to a student dormitory where they arrested the students.
The arrest caused a chain reaction in some quarters saying it was a form racism against the Papua people.
Emanuel Gobay from the Lembaga Bantuan Hukum Papua said law enforcement agencies violated law number 40 of 2008 concerning the elimination of racial and ethnic discrimination.