The 35-year-old victim was beaten to death on Friday by a group of men who had accused him of desecrating Sikh holy texts, according to media reports. One of the man's hands was hacked off, the reports said.
Police superintendent Jashandeep Singh Randhawa said a member of a Sikh warrior sect called the Nihangs had been taken into custody after the attack close to Singhu village, on the northwest border of the capital.
"We are probing his role in the murder," the police officer said. "The claim of desecration of holy book at the Singhu border is yet to be verified. It is a matter of investigation.”
Thousands of farmers, mainly from the Sikh-dominated state of Punjab, have been camped out on the borders of capital since last year demanding Prime Minister Narendra Modi's government withdraw laws to liberalise the agricultural economy.
The Samyukt Kisan Morcha, an umbrella group for farmers organisations, issued a statement condemning the killing.
"The Morcha is against sacrilege of any religious text or symbol but that does not give anyone the right to take the law into their hands," it said.
The farmers' protests have largely been peaceful since January, when a large group tried to enter the capital and hoist a flag at the historic Red Fort to embarrass the government.
Modi's Bharatiya Janata Party said Friday's murder showed that farm leaders were losing control of their campaign.
"It's time saner elements, if any, among them apologise and engage with the government unconditionally," BJP general secretary B.L. Santhosh said in a tweet.