Embakasi MP David Mwenje and 31 other people were arrested yesterday, following the massacre at Kariobangi.
Mungiki sect leader Ndura Waruinge, and Taliban vigilante group head David Peter Ochieng were among those held.
The MP's lawyer said police were preparing to charge Mr Mwenje with inciting the violence.
Police commissioner Philemon Abong'o confirmed that Mr Mwenje and Mr Waruinge were being held for allegedly inciting the Sunday night violence at Kariobangi estate, in Nairobi.
"We don't arrest anybody unless we have sufficient evidence to justify it," he said.
Mr Abong'o added that the MP had other incitement charges pending in court.
Mr Waruinge was also being investigated over some remarks he allegedly made in Nyandarua on Saturday, said Mr Abong'o.
Members of the Mungiki sect and the Taliban vigilantes were said to have been at the centre of the bloodbath in Kariobangi, when 21 people were killed - the toll rose when one badly injured victim died in hospital – and a further 31 were seriously injured after a gang of about 300 youths rampaged through the estate wielding pangas and axes.
The gang's targets were the Taliban, who on Saturday were said to have hacked to death two Mungiki members in retaliation for the murder of one of the vigilantes.
The youths, said by police and residents to be from Mungiki, struck back at 8.30 pm on Sunday, hacking at anyone they could find.
Police said they were pursuing leads that the attack at Kariobangi was planned elsewhere before being executed with precision and speed.
Armed police arrived at the homes of Mr Mwenje and Mr Waruinge in Dandora and Ngong estates as dawn broke.
Mr Ochieng was arrested at Kariobangi at 2pm and taken to Kasarani police station amid tight security.
Mr Mwenje, of the Democratic Party, was first taken to Buru Buru police station and then transferred one hour later to Kasarani, where the squad investigating the massacre is based. The ten-man team is headed by Chief Inspector Daniel Mutie. On Tuesday, police gave an assurance that the squad would be impartial.
MPs Maina Kamanda (Starehe), Norman Nyagah (Kamukunji), Kiraitu Murungi (Imenti South), Paul Mugeke (Makadara) and Adolf Muchiri (Kasarani) were already at the station, trying to secure Mr Mwenje's release.
They said they will this morning go to court to have him released on bond.
Police questioned the Democratic Party MP for six hours then declared they were not releasing him. It remained unclear where Mr Waruinge was being held.
Mr Mwenje locked police out of his home until 8.30 am.
He said as he was being taken away: "About 30 armed detectives surrounded my house but I declined to allow them in. I could not take the risk because I did not know what they wanted."
He added: "I decided to accompany them to Buru Buru police station when they convinced me I was not under arrest. They told me they were verifying a minor issue."
It was at Buru Buru police station that the police told him he had been arrested over the Kariobangi killings.
Mr Mwenje's lawyer, Mr Mutavi Maseki, said the MP was made to record two statements on his alleged link with Mungiki and the Kariobangi violence.
"I have spoken to my client and he told me the police had informed him they were charging him with inciting the violence. The charges are fake since the police have not proved he was linked to the violence," he said.
He added: "They lured Mwenje to the police station under the pretext they were investigating an incident in which he was attacked by a woman over the ownership of a plot last week. They are now treating him as a suspect in the Kariobangi violence."
Mr Maseki said police were preparing to charge the MP in a court outside Nairobi.
Earlier Mr Abong'o directed the police to crack down on members of the sect and other vigilante groups countrywide.
A statement signed by police spokesman Peter Kimanthi read: "We note with concern that members of Mungiki Sect and some members of the vigilante groups have been involved in criminal activities with a view to destabilising security in the country.
"The Commissioner of Police has directed all the provincial and formation commanders to carry out intensive operations throughout the country to crack down on members of all the self-styled groups who are bent on perpetuating lawlessness and firmly deal with them in accordance with the law."
In an extraordinary move, police released a list of the people killed in the fighting, not by name but by ethnic background.
They announced that among the dead were 10 Luos, three Luhyas, a Kisii and a Turkana. Six people remained unidentified. Of the 31 injured, 11 were Luos, nine Luhyas, five Kikuyus and two Kambas. Four others in critical condition had not been identified.