Police inspector B M Kale attached to the Kongaon police station told PTI that the victim and the accused working for the person.
Yesterday, they went to the farm to cut wood after which a quarrel ensued between the two over some petty issue.
The accused is alleged to have attacked the victim on his head with an axe and killed him instantly, the police said.
The victim's body was found lying in a pool of blood today morning, after which the police registered an offence of murder and detained the accused.
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An offence under Section 302 of the Indian Penal Code has been registered with the local police.
The police identified the victim as Shantaram Narkhede (35) and the accused as Ramesh D Waghe (40), both residents of Tad Ali in the powerloom town.
Senior police officers from Bhiwandi visited the scene of offence and directed investigations, while the victim's body has been sent to the government hospital for postmortem.