IU pitcher Eric Arnett was selected by Milwaukee with the #26 pick overall. He is the first IU player taken in the 2009 draft and the first IU player to be selected in the first round of the MLB Draft since Jim DeNeff in 1966. [Edit: as has been noted elsewhere, the Cubs selected Kevin Orie with the 29th pick of the supplemental portion of the first round in 1993. At the time there were 28 MLB teams. So, depending on your definition, Arnett is the first since 1966, or the first since 1993 and the highest pick since 1966].
Other picks of local interest are Stanford's Drew Storen (son of former Indianapolis/XM Radio sportscaster Mark Patrick), who was selected by the Washington Nationals with the #10 pick and Missouri's Kyle Gibson (from Greenfield, Indiana), selected #23 overall by the Minnesota Twins.