Luhut Panjaitan was speaking at a defence forum in Singapore less than two weeks after coordinated gun and bomb attacks in Jakarta left four civilians dead.
He said about $800,000 were found last week to have been sent to Indonesian extremist groups.
The Islamic State group (IS) has claimed responsibility for the January 14 attacks, spurring concerns it is getting a foothold in southeast Asia.
"We are tracing right now... how do they (Indonesian extremist groups) get finance," Panjaitan said.
He said about $100,000 came from the Syrian city of Raqa, the capital of ISs self-styled caliphate, to support extremist activities in Indonesia, and about $700,000 came from Australia.
He said it was not known where the money had come from in Australia.
"Right now our agencies are working very hard, trying to monitor this financing support, because without financing I dont think they can move more aggressively," Panjaitan said.
He did not give other details about the funds.
Panjaitan stressed the need for greater international cooperation, saying no country could fight the threat alone.
He cited information shared by Australia with Indonesia on the flow of funds, in addition to a communication hotline with Singapore as examples of "good cooperation" between countries.
Panjaitan also said the weapons used in the Jakarta attacks were smuggled from the southern Philippine island of Mindanao to the Indonesian town of Poso.
Panjaitan and Singaporean Defence Minister Ng Eng Hen said financing and logistics support from overseas were evidence that terror groups in the region were improving their coordination.
"There is an international financing network which you must try to strangle and choke to cut off the flow of funds," Ng told reporters at a joint news conference with Panjaitan.
"The more we cooperate the stronger we become. This is a fight that may last many decades, we need many partners in this," Ng said.
Singapore last week disclosed it had arrested 27 Bangladeshi construction workers last year for supporting "the armed jihad ideology" of militant groups like IS and deported 26 of them.
Officials said that while the workers were being being groomed to carry out attacks in their home country and elsewhere, they could have easily turned against Singapore.(*)