The cabin crew of the Air Asia flight found the baby minutes before the plane was supposed to land on Thursday.
They questioned all the female passengers aboard and a 19-year-old woman admitted to having given birth to the baby on the plane.
Police officials told the BBC the woman said she did not know she was pregnant.
Airport police have registered a case and are investigating the matter, they added.
“She gave birth to a seven-and-a-half month baby in the plane’s toilet and left it on the floor,” senior police official Sanjay Bhatia told the BBC.
He added that police were waiting for a post-mortem report to find out how the baby had died.
“We will find out more and take necessary action after we get the report,” Mr Bhatia said.
The woman, who is a taekwondo fighter, was not allowed to board her connecting flight to South Korea.
Air Asia India issued a statement apologising to “guests experiencing disruptions in their flight schedule”.
“We will be assisting in the investigation and cooperating with all concerned agencies,” the statement said.
The police are currently trying to contact the woman’s family in Assam.