Officers swooped on the London offices of the Richard Desmond-owned Daily Star Sunday about one mile away from the News of the World.
Clive Goodman, the News of the World royal correspondent who was jailed in 2007 over the first hacking scandal, had been working for the Star on Sunday.
Mr Goodman was arrested earlier today after a dawn swoop by officers at his home in Surrey.
Referring to Goodman's arrest, a Scotland Yard statement said: “At 6.11am officers from the MPS' Operation Weeting together with officers from Operation Elveden arrested a man on suspicion of corruption allegations in contravention of Section 1 of the Prevention of Corruption Act 1906.
“The man, aged 53, was arrested at a residential address in Surrey. A search is ongoing at this address.”
Mr Goodman was arrested in August 2006 along with private investigator Glenn Mulcaire over allegations that they hacked into the mobile phones of members of the royal household.
Five months later the royal reporter was jailed for four months and Mulcaire for six months after they admitted intercepting voicemail messages, including some left by Prince William, now the Duke of Cambridge.
The conviction prompted editor Andy Coulson to resign as News of the World editor.