Vijay Thopte, an absconding gangster who was convicted for the murder of union leader Datta Samant, was arrested at Vashi on Thursday morning.
Samant had led the textile mill strike in the early 1980s.
The crime branch also arrested three other criminals who had planned to threaten builders and extort money from them. Thopte (36), a native of Purander taluka in Pune, had jumped parole five years ago after he was sentenced to life imprisonment for shooting Samant in 1997.
"Our detection squad had information that members of the Guru Satam gang were planning to meet at Vashi to chalk out a plan to threaten and extort money from builders in Mumbai, Navi Mumbai and Thane," Deputy Commissioner of Police (Crime) Dattatrey Shinde said.
Satam, who operated in the Parel-Koliwada area, has 28 serious cases of murder and extortion registered against him.
A crime branch team led by Police inspector Avinash Dharmadhikari laid a trap for Thopte and his accomplices. The police had information that the gang would be armed.
As soon as the gangsters assembled, the police arrested them. Thopte's accomplices have been identified as Jagannath Jaiswal alias Deshmukh alias Anna (39) from Sewri, Sandeep Tiwrekar (36) from Dadar and Deepak Pednekar (35) from Prabhadevi.
"Thopte had had been granted furlough from Yerawada jail on May 18, 2005. He went absconding after that. We have managed to get him after five years," Shinde said.
The Mumbai police commissioner had recently announced a reward of Rs 10,000 for information leading to Thopte's arrest. The crime branch has recovered a 7.65 bore pistol and two rounds from Thopte.
Shinde said among the others arrested, Jaiswal has committed four murders between 1992 and 2000, including that of Mumbai serial blasts accused, Hanif Kadawala.
Police have found a revolver and four live cartridges on him.