Police have questioned a newspaper's royal editor and two other men about claims that staff working for Prince Charles had phone calls intercepted.
Clarence House said it would not comment on the arrests
The three, who include the News of the World's Clive Goodman, were arrested in south London on Tuesday.
A 50-year-old man, not Mr Goodman, has now been released on bail, police said.
Complaints by three staff at Clarence House sparked an inquiry which has been widened to examine whether other public figures have had calls intercepted.
Scotland Yard said the claims had "potential security implications" - which was why the investigation was being handled by the anti-terrorist branch.
Scotland Yard said in a statement on Tuesday: "Police launched an investigation after concerns were reported to the Met's Royalty Protection Department by members of the Royal Household at Clarence House.
"It is focused on alleged repeated security breaches within telephone networks over a significant period of time and the potential impact this may have on protective security around a number of individuals."
It added that as a result of initial inquiries, police now believe "public figures beyond the royal household" have had their telephones intercepted.
"Police continue to work with the telephone companies concerned and continue to have their full support in attempting to identify any other person whose telephone may have been intercepted," the statement said.
Officers have been working with the telephone firms for four months and have uncovered mobile phone numbers that may belong to other members of the Royal Family, politicians and celebrities.
Security expert Mark Cooper told the BBC the process of accessing voicemail messages stored on an individual's mobile phone was "reasonably straightforward".
He said: "It does appear that, in this instance, voicemail messages that have been left by members of the royal household have been listened in to, potentially by the three men arrested."
Mr Cooper said it was possible to call a mobile which had received voicemail, punch in a code and that would allow the caller to access the messages.
"Generally landline phone calls are easier to intercept than mobile phone calls. Mobiles now are almost always GSM - digital and encrypted - but it is still possible to intercept them."
Mr Cooper said the three ways of intercepting mobile telephone conversations were at the handset end, during the conversation itself - which is illegal in the UK - or at the mobile phone company.
The News of the World confirmed that Mr Goodman, 48, had been arrested and was questioned at London's Charing Cross police station.
The three men were arrested at 0930 BST on Tuesday in Putney and Sutton, south London.
They were detained under Section 1 of the Regulation of Investigatory Powers Act 2000.
Detectives also searched business premises in Wapping, Sutton and Chelsea.
Clarence House - Prince Charles's official residence - said it would not be commenting on the arrests.
BBC home affairs correspondent Daniel Sandford said the initial complaints were from Prince Charles's communications secretary and two employees who work with Princes William and Harry.
Our correspondent said the investigation was "growing, rather than shrinking" because it was extending beyond the Royal Family.