Dasharath Madkami told reporters he found the animal when a strange sound woke him up around 3am (local time).
Mr Madkami said he raised an alarm to alert other villagers who overpowered the animal and tied it to a tree.
The panicky villagers initially wanted to kill the crocodile, but were dissuaded by the headman.
Local wildlife authorities eventually came and rescued the animal.
There was some dispute over where it could be released.
Forest officials wanted to release it back to the nearby Satiguda dam, where it had come from, but villagers refused as they feared it would come back to the village.
"There are some 30-40 crocodiles in the Satiguda dam. This one had perhaps slipped in to the village, which is just a kilometre away from the dam, to lay eggs," local forest official Sushant Nayak told the BBC.
The crocodile was then released into the Balimela reservoir which is 60km (37 miles) away.
