The arrests of the five men, whose detention came days after a Nepalese soldier was held in Britain on charges of torture, are the first in Nepal for crimes committed during the decade-long conflict that ended in 2006.
The five men, all middle-ranking cadres, have been charged with the abduction and murder of Dekendra Raj Thapa, a radio reporter and human rights activist who died in 2004.
Lachhiram Gharti, one of the accused, had confessed to taking part in the murder, Binod Sharma, an inspector in the western district of Dailekh, told AFP.
'He confessed to us that they kidnapped (the victim) under the pretext of a discussion on water supply and took him to a local school,' Sharma said.
'They tortured him by repeatedly beating him and when he fell unconscious, he was brought to Gharti's home.
'Gharti told us that he gave a glass of water to him. After drinking it, he again fell unconscious ... so they dug a pit and buried him alive.'
Thapa's wife Laxmi, who has two teenage daughters and an 11-year-old son, told AFP she had almost given up hope of getting justice over his death.
'But now the accused have been arrested and I hope that justice will prevail,' she said.
The arrests follow the appearance in a British court on Saturday of Nepalese army colonel Kumar Lama, currently serving as a United Nations peacekeeper in South Sudan, who is charged with two counts of torture.
The 46-year-old stands accused of inflicting severe pain or suffering on two men when he was in charge of a barracks during the conflict in 2005.
More than 16,000 people died in the civil war between Maoist rebels and government forces, and more than 1000 are still missing.
There are allegations of killings and torture on both sides, and rights groups say little has been done to bring justice to victims and their families.