The proposal is the pet project of anti-drugs chief Budi Waseso, who plans to visit various parts of the archipelago in his search for fierce reptiles to guard the jail.
"We will place as many crocodiles as we can there. I will search for the most ferocious type of crocodile," he was quoted as saying by local news website Tempo.
Waseso said that crocodiles would be better at preventing drug traffickers from escaping prison as they could not be bribed - unlike human guards.
But he is banking on the convicts lacking Roger Moore's crocodile-running skills showcased in Bond movie "Live and Let Die" when he escapes from an island using the reptiles as stepping stones.
"You can't bribe crocodiles. You can't convince them to let inmates escape."
The plan is still in the early stages, and neither the location or potential opening date of the jail have been decided (later Waseso revealed he also wants tigers and piranhas as guards).
Indonesia already has some of the toughest anti-narcotics laws in the world, including death by firing squad for traffickers, and sparked international uproar in April when it put to death seven foreign drug convicts.
But President Joko Widodo has insisted that drug dealers must face death as the country is fighting a "national emergency" due to rising narcotics use.
Despite the harsh laws, Indonesia's corrupt prison system is awash with drugs, and inmates and jail officials are regularly arrested for narcotics offences.
Anti-drugs agency spokesman Slamet Pribadi confirmed authorities were mulling the plan to build "a special prison for death row convicts".
He said only traffickers would be kept in the jail, to stop them from mixing with other prisoners and potentially recruiting them to drug gangs.
The agency is currently in discussions with the justice ministry about the plan, he added.