The men were detained after raids early on Tuesday morning on isolated houses in the Dromtree area of South Armagh. Six cars were also seized.
They are being quizzed about January's murder, when the 44-year-old was beaten and stabbed to death while walking his dogs near his home in the Co Down border town of Newry.
Ostracised by republicans
The IRA is suspected of having carried out the attack, although no organisation has claimed responsibility.
Collins, who owned up to his reign of terror in a book, Killing Rage, had been in fear of his life since giving evidence that convicted a number of IRA men during the 1980s.
He fled from Newry but returned to his home town some years later when the IRA offered a post-ceasefire amnesty to informers if they made a public retraction of their evidence.
Sinn Fein condemned the arrests of the men as "provocative harassment" and demanded their immediate release.
Local Sinn Fein Assembly member Conor Murphy said: "These arrests are blatantly provocative at this time.
"They have been carried out as part of a campaign of harassment against these men and there is no justification for them.
"I would call on the RUC to release them immediately and to return their vehicles."
Northern Ireland
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Former IRA man found dead
(27 Jan 99 | Latest News)
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