Avichai Mandelblit, who did get the job, announced in September that he meant to indict Sara Netanyahu on fraud charges, accusing her of misusing some $100,000 through her management of the prime minister's official residence in Jerusalem.
The police identified the pair as Nir Hefetz, a former Netanyahu spokesman, and Shlomo Filber, the ex-director of the communications ministry under Netanyahu.
The statement also noted that the investigation, which was announced on Sunday, is a "branch" of a probe launched in June 2017 into suspected corruption at Bezeq, Israel's largest telecom company. Known as Case 4000, the investigation revolves around suspicions that Netanyahu enacted policies potentially worth hundreds of millions of shekels to Elovitch in exchange for positive coverage on Walla.
"As part of the investigation, suspicions accumulated on felonies concerning ethics, fraud, money laundering and securities violations, conducted over extended periods of time, frequently and systematically as part of relationships between Bezeq executives and public servants and their associates", the Israeli police said on Tuesday.
Also arrested were Shaul Elovitch, the controlling shareholder of telecommunications group Bezeq, as well as members of his family and senior Bezeq executives.
Last night, the gag order was lifted on reporting the names of those arrested in the affair.
Netanyahu is not a suspect in that case but Israeli media said he was likely to be questioned soon.
Elovitch has already been investigated over a merger of Bezeq with cable company Yes which saw him pocketing dozens of millions of dollars. Sunday, Dec 27, 2009.
On Monday, Elovitch "categorically" denied the suspicions against him, saying that "no offense has been committed". We suggest that people should be patient and not rush to conclusions.
According to the police and Israeli news reports, Nir Hefetz, a top adviser to the prime minister, passed a message to a former judge, Hila Gerstel, through an intermediary in late 2015: Would she drop the case against Sara Netanyahu in exchange for being named attorney general?
These arrests came a few days after police said they had enough evidence to indict Netanyahu and recommended corruption charges against him in two other cases.
According to the police, Netanyahu and his family received goods, including jewelry, cigars, and Champaign, worth about one million shekels (282,800 USA dollars) from Israeli businessman and Hollywood tycoon, Milchan and the Australian businessman, James Packer. In return, Netanyahu is alleged by police to have intervened on Milchan's behalf in matters relating to legislation, business dealings, and visa arrangements.
Another bribery scandal, called the "submarine affair" or Case 3000, also involves Netanyahu's associates.
Netanyahu, who has maintained his normal working schedule and is due to meet U.S. President Donald Trump in Washington on March 5, has denied all the allegations and vowed to remain in office to serve out his term which runs until 2019.