The Thursday night slaughter, which is suspected to be a response to a crackdown on corrupt police officers, was the worst massacre in more than a decade in the seaside city.
The armed men shot dead men, women and children at random in the working class district of Baixada Fluminense on Rio's rough north side.
Security chief Marcelo Itagiba said not all the 11 prisoners, members of the state military police force, had necessarily taken part in the killings but they needed to explain what they were doing in the Baixada Fluminense area on that day. Another police officer is still being sought.
Federal police investigators had unconfirmed information that the armed men were linked to death squads that operate in Baixada Fluminense, federal police superintendent Gilberto Milton Rodrigues said.
State authorities have said rogue military police likely carried out the massacre in reprisal for the arrests of eight officers suspected of a separate double murder. Because of their rigid organisational style, Brazil's street police are known as military police but they are not affiliated with the army or federal government.
Relatives and friends of 12
victims attend the funerals
The arrests were part of a drive against corruption and criminal activity by police in Rio. The city is plagued by violent crime, with rival drugs gangs controlling many slum areas and defying authorities.
International human rights groups say Rio police have a history of summary executions. Officials said police killed 983 "suspects" last year and 1195 in 2003. Last year, about 50 Rio police were killed in the line of duty.
Troops from a new National Security Force are to deploy in Rio this week but Itagiba said the operation was not connected to the massacre investigation. They had planned to move into the city last month but were delayed, he said. The force will concentrate on fighting the drugs gangs and arms trade.