Handler Trent Burton was feeding male croc John when it grabbed him by the hand in front of horrified onlookers at Shoalhaven zoo, 160 kilometres (99 miles) south of Sydney.
The local Smith Coast Register newspaper said he was rushed to hospital with bites to both hands, although they were not thought to be serious.
Shaken elderly witness Marlene Orr said it was "the scariest thing I've ever seen in my life".
Another witness Michelle Brady told the newspaper that the trainer was about to feed the crocodile some meat when it took the meal before he should have done.
"The trainer tried to take it out of the crocodile's mouth and the croc just grabbed his hand and pulled him to the ground and dragged him into the water," she said.
"Then the trainer got free and got out of the water."
Zoo owner Nick Schilko said Burton had been working with crocodiles for more than a decade and fed John daily.
"It's an attack and that is serious, but thankfully the injuries aren't life threatening, which it certainly had the potential to be," he said.
"We will look at what happened and how it happened and review it."