Police said four men, aged 72, 58, 56 and 55, were being held in the probe into financial irregularities at LCC.
Liverpool City Council's chief executive Ged Fitzgerald and leader of the Tories at LCC Geoff Driver are among those arrested.
The probe is into a council contract.
Lancashire Police said the arrests at addresses in Preston and Merseyside were made on suspicion of conspiracy to pervert the course of justice and witness intimidation, but not on suspicion of fraud.
The investigation, which was launched in 2013, relates to allegations of financial irregularities over the tendering of a Â£5m contract with One Connect Ltd, a joint venture between the council and BT to run some services.
The deal included running the council's fleet of vehicles which was agreed by LCC's Conservative administration, which was then led by Mr Driver.
The contract was revoked later that year by the new Labour administration.
The Conservatives regained control of LCC in the elections earlier this month, and Mr Driver, 72, is expected to be named as leader of the council at a meeting on Thursday.
Mr Fitzgerald was the chief executive at LCC before he left to take up the same post at Liverpool City Council.
In January Lancashire's police and crime and commissioner Clive Grunshaw said the investigation into the allegations had cost Â£2m and 22 police officers were working on it.
LCC said it was not making any comment although it was aware of the police statement.
A spokesman for Liverpool City Council said: "We do not comment on personnel matters relating to individual employees."

The rider, troupe owner Ken Fox, was taken to Derriford Hospital, Plymouth after falling from the top of the cylindrical track.
An eyewitness told BBC News: "There was an air of panic with people screaming and running out of the tent."
Mr Fox, from Cambridge, was treated for bumps, bruises and scratches.
Emergency services remain on the scene at the showground in Wadebridge speaking to witnesses.
On Facebook, Ken Fox Wall of Death said in response to concerns for the rider: "Ken Fox is safe and well just a bit bashed about."
Devon and Cornwall Police say nobody else was injured in the accident.
The wall of death is a motorcycle show in which stuntmen ride at speed around a vertical track performing tricks and stunts on 1920 Indian Scout bikes.
The Ken Fox Wall of Death troupe has been featured in music video and on television, including the BBC One idents showing stunt riders going round in a circle.
The eyewitness said the rider fell from the top of the wall on to his head but he could not see why he fell.
People outside said they heard a huge bang and that they felt the earth shake.

A study by professional services firm PwC found an average of six high street chain stores closed every week across Scotland last year.
The figure was similar to 2013's but fewer new stores took their place.
Overall, a net 66 shops disappeared from Scotland's high streets over the course of the year.
The research found that mobile phone shops, bank branches and fashion stores were among those hardest hit.
PwC said high streets were transforming as consumers increasingly adopted newer digital channels, mobile technologies and smartphone apps, adding that retailers were now favouring "clicks over bricks".
Bruce Cartwright, head of business recovery services at PwC in Scotland, said: "The Scottish high street continues its drastic overhaul in response to the advance of online sales and changing consumer demand, with last year's numbers exposing the harsh impact of 'macro' changes on the high street, especially in certain sub-sectors.
"Regulation has blindsided the money shops, the advance of technology has hammered some phone operators and the internet continues to dent the clothing sector.
"Despite the Scottish economy reflecting healthy, sustainable growth during 2014 and into 2015, the net loss of shops has accelerated.
"The insolvencies of Phones4U, Blockbuster, Albemarle & Bond and La Senza - a diverse cross-section of the retail market - epitomise these factors."
He added: "Despite the continuing problem of closures, new sub-sectors - such as discount shops and charity shops - keep growing.
"The strength of the restaurant and fast-food sectors is also a boost for the high street."
A council chief and the leader of the Conservatives on Lancashire County Council (LCC) have been arrested as part of a long-running fraud investigation, the BBC understands.
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A motorcycle stuntman was airlifted to hospital after an accident during a "wall of death" performance at the Royal Cornwall Show.
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Scotland's high streets are facing drastic change because of pressure from online sales and changing consumer habits, according to a new report.