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Acting on a tip-off, a DRI team searched an under-construction building in the Paachpavli area on Saturday and found a small laboratory in the structure, the official said.
He said the team found chemicals, materials and machinery required to manufacture mephedrone at the scene.
The accused had already prepared more than 50 kg of mephedrone in liquid form, and were in the process of making the crystallized or powder form, the official said.
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The mastermind or financier of the operation and his three accomplices involved in manufacturing the drug were arrested under the Narcotic Drugs and Psychotropic Substances (NDPS) Act, the official said.