Alimuddin alias Baba was arrested late Wednesday from a house in Fatehpur, around 120 km from here, after police received a specific tip-off, an official of the Uttar Pradesh Police's Special Task Force told IANS.
Alimuddin's movements were being monitored through electronic surveillance for some time and police zeroed in on him while he was staying at the house of Shamim alias Shammu.
According to an official, he has admitted that mafia-turned-politician Babloo Srivastava, then an associate of Dawood Ibrahim, offered him money to kill Arora.
The Central Bureau of Investigation (CBI) had declared an amount of Rs 100,000 on Alimuddin's head but he managed to hoodwink the federal investigation agency for two decades.
Arora, an assistant custom collector posted in Mumbai, was shot dead near his residence in Allahabad March 24, 1993. He had seized at the Mumbai airport a consignment of Dawood, containing arms and ammunition.
Babloo Srivastava planned the murder of Arora along with his two associates - Kamal Kishor Saini and Manjit Singh alias Mange Sardar - who have been sentenced to life imprisonment.
Last year, a Kanpur district judge had sentenced Babloo Srivastava to life imprisonment under Sections 302 and 120B of the Indian Penal Code for the murder of Arora.