The two accused were earlier in the day questioned by a police team.
"After questioning, AAP MLA Prakash Jarwal and Kapil Nagar were arrested in a doctor's alleged suicide case registered at Police Station Neb Sarai," said Deputy Commissioner of Police (DCP), South, Atul Thakur.
The AAP MLA on Friday moved an anticipatory bail in a Delhi court in connection with an FIR on the abetment charges in a doctor's suicide case.
The court has fixed the hearing on May 11 on the MLA's plea.
Jarwal, who was booked by the Delhi Police on the charges of extortion and abetment to suicide after a doctor allegedly committed suicide in Durga Vihar in south Delhi, had moved Rouse Avenue Court seeking anticipatory bail.
He has submitted that he shall be co-operating with the police authorities in the investigation.
The FIR was lodged by the Delhi Police on the complaint filed by Hemant, son of the deceased, where he alleged that the deceased was threatened and intimidated for extortion by Jarwal and Nagar.
The deceased had also been running the business of the water tanker in collaboration with the Delhi Jal Board (DJB) since 2005.
It is further alleged that since the accused became the MLA in 2015, he used to extort money from the deceased on a monthly basis through Nagar and other people.
When the deceased refused to give the money, the accused allegedly threatened him to get the tankers removed from the DJB and stop the payments of pending bills.