Dale Cregan is being questioned over the murders of two police officers
Constables Fiona Bone, 32, and Nicola Hughes, 23, had been sent to investigate what appeared to be a routine burglary report when they were attacked on Tuesday with a gun and a grenade.
Soon afterwards one of the country's most wanted men, Dale Cregan, 29, gave himself up to police.
It has emerged that Cregan was arrested in June in connection with another murder but was released on bail pending further inquiries.
Chief Constable Sir Peter Fahy said in a statement: "It is absolutely normal in the course of complex crime inquiries that when people are arrested there are occasions where there is insufficient evidence available for them to be charged.
"In those circumstances suspects have to be released on bail as there are strict time limits covering how long suspects can be held in custody without charge. That is exactly what happened in this case."
Cregan had been questioned and bailed in connection with the murder of Mark Short, 23, who was shot dead in a Manchester pub in May. Mr Short's father David Short, 46, who had branded his son's killer a coward, was murdered in a gun and grenade attack at his home in August.
After he was released on bail in relation to the killing of Mark Short Cregan went on the run and became Manchester's most wanted man. After the murders of the two police officers at an address in Abbey Gardens, Hattersley, the fugitive gave himself up at nearby Hyde police station.
At a press conference on Tuesday, Sir Peter said it was one of the "darkest days" in the history of the police service.
The outrage prompted renewed calls for the routine arming of police. But Sir Peter said his force believed "passionately" that police should remain unarmed, despite the tragedy
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