Derry City and Strabane District Councillor Gary Donnelly has been released without charge, as the investigation into the murder of Denis Donaldson continues.
A second man in his 30s remains in Garda custody.
Councillor Donnelly was arrested while attending a commemoration in Donegal yesterday and taken to Letterkenny Garda Station for questioning.
Former Sinn Fein member Denis Donaldson was shot dead in April 2006 in a remote cottage outside Glenties, four months after he confessed to working as a British agent for police and MI5 for 20 years.
Gardaí are continuing to appeal to anyone with information in relation to this murder to contact them at the Incident Room at Letterkenny Garda Station.
Councillor Michael Cholm Mac Giolla Easbuig claims it was a staged arrest:
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