Alen Moradian, 48, a notorious underworld drug lord with links to the Comanchero bikie gang, was shot dead in June while sitting in his car near the busy Bondi Junction shopping precinct.
Shortly after the slaying police found a burnt-out Porsche nearby and an incinerated Holden Commodore at Zetland.
Detectives arrested a 42-year-old man at Yowie Bay in Sydney's south early on Wednesday.
He was taken to Sutherland Police Station and charged with murder and other offences relating to the brazen daytime shooting.
Police will allege he was the "mastermind" behind the shooting of Moradian, which they believe was motivated by an outstanding debt.
Detective Chief Superintendent Jason Weinstein confirmed half a million dollars was owed to an organised crime entity.
"Those two individuals themselves were not owed the money but other entities within organised crime were," he told reporters.
"But this is what happens when you involve yourself in the underworld, in drug distribution, in supply of drugs, you at some point in time will come into conflict."
During a separate early morning raid on Wednesday in the southwest suburb of Moorebank, detectives arrested a 31-year-old man who was taken to Liverpool Police Station.
He was also charged with murder, refused bail and appeared in Liverpool Local Court where he is to reappear at a later date.
Both men cannot be named for legal reasons.
Police will allege the older man instigated the fatal shooting while the younger man helped co-ordinate it.
Det Supt Weinstein said police did not believe the two men were the gunmen and investigations were under way as to who pulled the trigger.
"The allegations are that the 42-year-old-male and the 31-year-old male themselves did not carry out the act, they gave the imprimatur, they gave the go ahead or the instructions for it to occur," he said.
Task Force Magnus, which targets and disrupts gun-related and violent crime, is expected to ramp up operations to deter revenge attacks.
"I say to those people who think that they may try and seek some retribution out of today's arrest, I would strongly say to you think again," Det Supt Weinstein said.
"From tonight, we will ramp up even further on those inside organised crime and outlaw motorcycle gangs who think they may want to try and seek some retribution."
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