The victim, named locally as Dermot Kildea, received a serious head injury after the attack at Glenard Park on Friday night.
Mr Kildea, 41, is originally believed to be from Manorcunningham but had moved to Letterkenny.
Donegaldaily.com understands that there had been a number of altercations between rival factions in the area in recent weeks.
Mr Kildea was found unconscious on the ground outside a house at Glenard Park after being attacked with a number of weapons.
There is an allegation that a slash-hook was used in the attack.
Gardai backed up by members of the Armed Regional Response Unit swooped on the area and arrested two men.
Three houses were also raided and a number of makeshift weapons recovered.
“A number of potential weapons including batons, baseball bats, legs of tables and hockey sticks were recovered in follow-up operations,” he said.
Mr Kildea was rushed to Letterkenny General Hospital where he was put into an induced coma and received 22 stitches to a head wound.
However he is expected to make a full recovery.
Letterkenny Lord Mayor Gerry McMonagle said this was now a serious escalation of the trouble in the area.
“It is no secret that this area has had its troubles and that has always been down to a small minority of people.
“Most of the people living around this area have nothing to do with this kind of thing and are busy trying to make a life for themselves.
“I have worked locally in the area and I have seen different situations at times involving violence.
“But I would have to say this is certainly an escalation of the problems when you see weapons like this used.
“It is a very worrying development which has led to one man being left in intensive care,” he said.
Two men aged 31 and 37 were arrested under Section 4 of the Criminal Justice Act and will appear in court this morning.