The latest arrest takes the total number of policemen held on similar suspicion during the last fortnight to seven.
The arrested policemen are suspected of helping Kashmiri-fighters to carry out attacks on pro-government targets.
“Their interrogation has brought to light a nexus between terrorists and police personnel,” said Gopal Sharma, the police chief in Indian-administered Kashmir.
Sharma said the arrested police constable Abd al-Ahad had been actively involved in the murder of a former law minister Mushtaq Lone on September 2002.
Lone was seeking re-election, when he was killed in an election rally.
Besides Ahad, another policeman Rustum Lone is alleged to have been involved in the killing. He has been arrested as well.
The police chief said the minister’s killing was planned and executed by Hizb Allah Mujahedin and Jaish-e-Mohammad and that the two arrested policemen had collaborated with them.
A couple of other policemen, including an officer, were arrested earlier this month in Indian-administered Kashmir for their alleged involvement in two suicide-bomb attacks in the state on 12 May and 3 June.
The two attacks had left two security force personnel dead and four others injured.
Around a dozen armed groups, seeking Kashmir’s independence from Indian rule, are battling Indian forces since 1990.