He is being questioned about the death of John Cooke, aged 33, whose badly beaten body was found in a house at Church Lane.
Sources said Mr Cooke’s arm was almost severed by the ferocity of the assault. It is believed he was attacked after a heavy drinking session.
Chief Inspector Raymond Murray said: “the nature of injuries to the victim are extensive in the extreme.”
Officers made the gruesome find after they were called to a hit-and-run collision in the town’s Hillhall Road on Sunday night. During their inquiries a member of the public alerted them to disturbances in nearby Church Lane. The bludgeoned body of the murder victim was found a short time later.
Sources said he was still breathing at the time but could not confirm if he managed to communicate with police. Mr Murray said the car involved in the accident, a red Volkswagen Golf, was linked to the murder.
The vehicle was later found abandoned at a house close to the scene of the killing. There were also reports of clothes being discarded from the car before it stopped.
Detectives refused to give any details about a motive, but no sectarian or paramilitary involvement was suspected. Five houses in Craigavon, Co Armagh, 20 miles from the scene, and another two in Belfast, have been searched as part of the inquiry, the chief inspector said.
Forensic tests were carried out on items taken from one of the properties.