The men, a 69 year old from Dungloe and a 31 year old from Annagry, had been in custody at Letterkenny Garda Station since Tuesday evening.
A file on the men’s arrest will now be compiled and sent to the Director of Public Prosecutions.
The 69 year old had been living in Glasgow for the past number of months but was arrested on Tuesday evening in Glenties.
The other man was arrested in Annagry on Tuesday night on suspicion of being in possession of a firearm on the day that Mr Donaldson was murdered on April 4th, 2006.
Officers from the National Bureau of Criminal Investigation based at Harcourt Square in Dublin arrived in Letterkenny to assist with the operation.
Former Sinn Féin official Mr Donaldson, 56, who had admitted being a British agent for more than 20 years, was shot dead in his remote home at Cloghercor, Doochary – off the main Letterkenny to Glenties Road, in 2006.
He had been shot twice – once in the head and once in the hand which was also severed.
He was found by a neighbour who noticed his door half open and immediately dialled 999.
Gardai had seen Donaldson in Glenties just 24 hours before he was assassinated on April 4th.
Mr Donaldson, who was the former head of Sinn Féin’s office at Stormont, had been living in Co Donegal since December 2005 when he admitted he had spied for the British.
Last week donegaldaily reported how the family of Mr Donaldson claimed the British security services may hold the key to solving the crime.
Mr Donaldson’s family claim British state agencies, particularly Special Branch, were “central to the murder”.
They said they were increasingly frustrated and concerned by the lack of progress in the Garda murder inquiry, claiming they haven’t met officers since 2009.
According to the Donaldson’s a meeting was scheduled for last week but Gardai cancelled it. They want answers to a number of key questions.
In a statement they said: “There are serious discrepancies and anomalies in accounts relating to the circumstances leading up to Denis’ Donaldson’s murder”.
In December 2005 Mr Donaldson received a written warning from police that he was about to be exposed in the media. The family claim he was then telephoned by his Special Branch handler, identified only as ‘Lenny’.
“This call caused Denis to secretly flee Belfast immediately”, the family said. The Sinn Fein man then publicly admitted his role as an agent in Dublin the next day; he then went back into hiding. On the 4th of April 2006 Denis Donaldson was brutally murdered near Glenties.
The Donaldsons continued: “For the Gardai murder inquiry to be effective, thorough and independent it must examine the identities, motivations, activities, links, communications and movements of the Special Branch handler Lenny and his colleagues.
“Lenny is intimately informed about the events surrounding Denis’ murder, Lenny holds the answers to many questions.”
The Provisional IRA denied involvement in the murder – and the Real IRA claimed two years ago that it had carried out the killing.