Mainul Hasan Shamim, who also goes by the aliases Sifat and Samir, was arrested early on Wednesday.
Police's counterterrorism unit claimed Shamim is one of the top four operatives of Islamist group Ansar Al Islam's (the former Ansarullah Bangla Team) military wing.
"During initial interrogation, Shamim confessed to his involvement in Dipan's killing as well as the murder of Riad Morshed Babu in Savar," said the unit's chief Monirul Islam.
The additional police commissioner told a media briefing on Wednesday that Shamim had also told them that he got training on explosives at a house in Dhaka's Mohammadpur.
Shamim was arrested during a 'special raid' in Gazipur's Tongi on the outskirts of Dhaka, Detective Branch Deputy Commissioner Mashrukur Rahman Khaled said.
In a statement, police said the raid was conducted on information gleaned from Md Suman Hossain, who was arrested on Jun 15 over the attack on another publisher, Ahmedur Rashid Tutul.
Suman and Shamim were among the six militants for whom police had announced a total bounty of Tk 1.8 million three months ago for information leading to their arrest.
The two had a bounty of Tk 200,000 each on their heads.
Police produced Shamim before a Dhaka court on Wednesday afternoon and secured a six-day remand to grill him in custody.
On the afternoon of Oct 31 last year, publisher Dipan was found hacked to death in his Jagriti Prokashony office at Shahbagh's Aziz Super Market in Dhaka.
Both Tutul and Dipan had published books by the secular writer-blogger Avijit Roy, who was killed in February last year.
"Shamim told police that dismissed army major Zia masterminded publisher Dipan’s murder. He has given us details over who had motivated him and provided them with weapons to carry out the killing," said Additional Commissioner Monirul.
Shamim and his accomplices had rented a house at Dhaka's Mohakahli, a month before the attack on Dipan.
"Dipan was murdered for publishing Avijit Roy's books. Shamim confessed that five persons took part in the killing," the senior police officer added.
Detective Branch Deputy Commissioner Khaled told bdnews24.com that according to their information, Shamim got involved with banned outfit Hizb ut-Tahrir in 2012 while living in Sylhet.
"In 2014, he took part in the killing of Shanto Mariam University student Riad Morshed Babu in Dhaka. We are trying to arrest the person who had radicalised Shamim in Sylhet."
Police said Shamim hailed from Sunamganj and studied at the Madan Mohan College in Sylhet. His brother lives in the UK and he was planning to flee there.
"Shamim claimed that he had met dismissed army officer Zia," said senior Detective Branch officer Khaled.
Monirul told Wednesday's media briefing that Shamim had confessed to be in charge of training the Ansarullah operatives, who took part in Dipan's killing and also coordinated the attack at Dhaka's Shahbagh.
"He is being prosecuted under the Anti-Terrorism Act and we expect to get more information about his outfit's operations during the remand," said the counterterrorism unit chief.