Juan Cano Giménez, 52, the current mayor of Polop de la Marina, is suspected of hiring two hitman to kill his party rival after they clashed over policy, and is being held in prison to await trial.
Alejandro Ponsoda, 55, was shot at close range by two gunmen as he arrived home on the evening of October 19, 2007.
After hearing what he thought was fireworks, a neighbour found the victim slumped in the seat of his car with bullet wounds to his head and neck. He fell into a coma and died from his injuries eight days later.
Police said he had been shot three times from two different weapons in a "mafia style execution" that they believed was the work of professional killers.
Mr Ponsoda had been mayor of the town just north of the popular holiday resort of Benidorm on Spain's southeastern Mediterranean coast for 12 years, and was known to have openly opposed plans to allow a new development comprising 5,000 new houses on the outskirts of the municipality.
The town, which has a population of 3,600 residents, is popular with holidaymakers and many British expatriates have homes there.
The murder shocked the local community and made headlines across Spain but despite an intense investigation police were initially forced to admit they had few leads.
Mr Giménez, from the same conservative Popular Party, had been pictured shedding tears at his predecessor's funeral and he promised to dedicate a new school to the late mayor's memory.
It was not until earlier this month that investigators had a breakthrough in the case when an unrelated surveillance operation provided a surprising link to the case.
Police investigating a local nightclub they believed was operating as a brothel stumbled across evidence allegedly connecting it to Mr Ponsoda's murder.
Several men, including the owner of the club, were brought in for questioning on suspicion that the premises had been used to plan the crime. Police arrested two men from the Czech Republic, one of whom worked as a doorman at the club, on suspicion of carrying out the assassination.
And in a twist, police raided the home of the new mayor and arrested him for allegedly plotting the murder. Another two men – a man with a previous record for drug trafficking, and the owner of a local shoe shop – have also been detained in connection with the killing.
Police believe they may have conspired to murder the mayor after he refused to give planning permission to a real estate deal that they were each allegedly set to profit from.
In total seven people have appeared before a judge and been remanded into custody without bail to await trial