The arrest comes as the long-stalled investigation into the October 2017 car bomb murder of Caruana Galizia intensifies.
Protesters blocked roads in Malta on Friday to demand Muscat's resignation, holding placards reading "assassins" and "blood is on your hands".
The demonstration comes after three government officials resigned on Tuesday amid a probe into the killing of investigative journalist Daphne Caruana Galizia.
A prominent businessman arrested over the murder of Malta journalist Daphne Caruana Galizia was released on bail on Thursday evening.
The climate of press freedom in Malta "remains dire" two years after investigative journalist Daphne Caruana Galizia was killed in a car bomb, Reporters Without Borders has claimed in a comprehensive new report.
The sons of murdered journalist Daphne Caruana Galizia have questioned the independence of a newly announced public inquiry into their mother’s death.
Commissioner Dunja Mijatovic says that the litigation is an attempt to intimidate Galizia's family.
A damning report into Malta's failure to identify those behind the murder of a journalist has highlighted systematic failings in law enforcement and raised questions about the rule of law in the country.
A portrait has been unveiled in the European Parliament in honour of the journalist killed whilst investigating corruption in Malta.