The arrests, which have come on the eve of Diwali, were made from different locations of the Kathmandu Valley. Indian national Santosh Chaudhary, 35, was arrested from Jyatha with the local Niroj Shrestha, 27, police said.
A huge cache of different brands of firecrackers, including 250 packets of sparklers and 45 packets of ground spinners, worth around Rs 150,000 was seized from the rented room of Chaudhary, police added.
In a separate incident, police arrested Amrit Prasad Chaulagain, 25, of Sindhupalchok district and seized a huge cache of firecrackers from his shop in Asan in the heart of the Kathmandu city.
Earlier, Nepal had banned the sale of firecrackers to avoid mishaps during Diwali in the country.