Terry Collins, the deputy commissioner of New South Wales state police, said the arrested captain had worked closely with munitions and had been "a mastermind and a key player" in the theft and sales.
 
The arrests bring to four the number of people accused over the weapons theft.
 
The M72 rocket launcher is mainly used
by the military as an anti-tank weapon
Abdul Rahman was arrested at his Sydney home late last year and charged with 17 offenses over the stolen M-72 shoulder-fired weapons.
 
Police allege Rahman, 28, had supplied five of the weapons to one of nine men arrested in late 2005 in a series of counterterrorism raids in Sydney and the southern city of Melbourne.
 
The nine men, all Muslims, face life sentences in prison if convicted of conspiring to carry out a terrorist attack in Australia.
 
Police have not revealed any details of a plot.
 
Collins would not comment on news reports that some of the weapons had been sold to a member of Australia's biggest outlaw motorcycle gang, the Rebels.