Martin McGuinness was "disgusted" by the allegations
The Sunday Times' Northern Ireland editor has been arrested in connection with the publication of alleged transcripts of telephone conversations between Sinn Fein's Martin McGuinness and senior UK Government figures.
Liam Clarke was detained along with his wife, Kathryn Johnston, on Thursday morning. A number of documents were also seized.
Mr Clarke and his wife co-wrote a biography of Martin McGuinness and an updated version contains extracts from transcripts of telephone conversations between the Sinn Fein MP and former Northern Ireland Secretary Mo Mowlam and Tony Blair's Chief of Staff Jonathan Powell.
On Wednesday, police arrested a 48-year-old man in connection with the investigation.
Officers have been examining a number of items seized during a house search.
Earlier on Wednesday, Mr McGuinness said he would refer allegations that his telephone conversations were monitored to Downing Street.
The allegation that the party chief negotiator's phone conversations were being tapped were carried in Wednesday's edition of the Times.
The new edition of a biography of Mr McGuinness, entitled From Guns To Government, contains what are said to be transcripts of calls bugged by MI5.
One features former Northern Ireland Secretary Mo Mowlam telling Mr McGuinness of her battle to stop the prime minister sacking her, the Times said.
Another features Mr Blair's chief of staff Jonathan Powell joking to the Sinn Fein negotiator about unionist politicians who were "asses", the newspaper reported.
How low Downing Street is prepared to stoop to curry favour with those who have been responsible for the destruction of lives
Lagan Valley MP
The editor of the Sunday Times, John Witherow, said Mr Clarke's account posed no threat to national security and merely embarrassed ministers.
He called for Mr Clarke and his wife to be released immediately.
Mr McGuinness blamed Special Branch for the tapping and described it as disgraceful.
"The information that has been obtained has been provided by British agents through them to unionist death squads who have killed hundreds of nationalists throughout the north so the war is not over for the securocrats," he said.
Downing Street refused to comment on the claims in the Times.
A spokesman for Tony Blair said they did not comment on intelligence matters or on leaked documents.
He said Jonathan Powell had worked very hard on the peace process and continued to put in a huge amount of effort .
He added that the governments' energies were engaged in finding a way forward.
Lagan Valley MP Jeffrey Donaldson is one of the Ulster Unionists alleged to
have been the butt of Mr Powell's joke.
He told the paper the supposed comments showed "how low Downing Street is prepared to stoop to curry favour with those who have been responsible for the destruction of lives and property in Northern
The newspaper said the bugging was part of a security services operation called "Narcotic1" and had started in the summer of 1997 and was still running.