Andy Coulson, former communications chief to David Cameron and ex-editor of News of the World, has been arrested by police investigating phone hacking allegations at the paper.
Clive Goodman, former royal editor at News of the World, has also been arrested for the second time in connection with the phone hacking scandal. He was jailed for four months in 2007 after he pleaded guilty to intercepting phone messages.
Reports have suggested that a further three former employees could be arrested over the scandal in the coming days.
Coulson was detained at 10:30am on Friday in South London by detectives investigating allegations of phone hacking and officers in charge of a corruption inquiry.
"Officers from Operation Weeting together with officers from Operation Elveden arrested a man on suspicion of conspiring to intercept communications, contrary to Section1(1) Criminal Law Act 1977 and on suspicion of corruption allegations contrary to Section 1 of the Prevention of Corruption Act 1906," Scotland Yard said in a statement.
The move comes after Prime Minister David Cameron said Rebekah Brooks, the News International chief executive, should have stepped down over the allegations.
But he defended his decision to employ Coulson as his director of communications.
The News of the World publishes its final edition on Sunday after James Murdoch, chairman of publishers News International, said the 168-year history of Britain's best-selling newspaper would come to an end.
Advertisers had deserted the News of the World in droves and police revealed 4,000 people may have had their phones hacked by the tabloid. The Royal British Legion dropped the News of the World as its campaigning partner and expressed "revulsion" at allegations that war widows' phones may have been hacked.
Mr Murdoch, the son of media mogul Rupert Murdoch, pulled the plug on the paper after claims that it paid private investigators to illegally intercept the voicemail messages of murdered schoolgirl Milly Dowler, bereaved military families and relatives of 7/7 bombing victims. It also stands accused of paying thousands of pounds illegally to corrupt police officers.