The man arrested in London and taken to Northern Ireland for questioning about two killings is reported to be a former British soldier who worked as a spy inside the IRA.
The man (46), believed to be the agent known as Kevin Fulton, was arrested in south-east London by police investigating two murders in the North involving alleged security force collusion.
He is being questioned by police in Antrim about the 1990 killings of Irish People's Liberation Organisation (IPLO) member Eoin Morley and Royal Irish Ranger Cyril Smyth.
Northern Ireland Police Ombudsman Nuala O'Loan conducted an inquiry into the shooting of Mr Morley in Newry, Co Down, and found that police Special Branch withheld information from detectives at the time.
The unit handles agents for the police to pass on information about paramilitary activity.
The Ombudsman's office found significant failings in the original murder investigation, which came after a time of heightened tensions between the IRA and the IPLO, a splinter Republican group.
Mrs O'Loan is examining the death of Mr Smith (21), who died after a bomb ripped through the permanent border vehicle checkpoint at Killeen, outside Newry, in October 1990.
He had just rescued James McAvoy (68), who was warned by an IRA gang that his sons would be shot if he did not drive the bomb to the checkpoint.
The PSNI's Historical Inquiries Team is re-examining over 3,000 murders during the Troubles to establish fresh investigation links.
The team is examining killings committed between 1969 and the signing of the Belfast Agreement in 1998 and is understood to have been looking at both cases.
PA