Two men have been arrested over the murder of IRA informer Denis Donaldson

An independent councillor arrested as part of investigations into the murder of MI5 agent Denis Donaldson has been released without charge.

Donaldson, a 55-year-old senior Sinn Fein official and close colleague of Gerry Adams, was shot dead at a remote cottage near Glenties, Co Donegal, in 2006 after being exposed as a British spy.

Gary Donnelly, a hardline republican and independent councillor in Derry and Strabane, was detained on Sunday.

A Garda spokesman said a second man , in his 30s and also arrested on Sunday, remained in custody under section 30 of the Offences Against the State Act.

"The investigation is ongoing," the Garda press office said.

"Gardai are continuing to appeal to anyone with information in relation to this murder to contact them."

It is the second time Mr Donnelly has been arrested and released without charge during investigations into Mr Donaldson's murder.

Dissident republican group the Real IRA claimed responsibility for the killing in 2009.

Ciaran Shiels, solicitor for the Donaldson family, from law firm Madden and Finucane, said: "The family have no comment in relation to either arrest at this stage.

"However, we don't believe either individual to be 'Lenny', Denis Donaldson's PSNI and RUC handler.

"The family believe he is the person with the most serious questions to answer in this matter and we would urge, yet again, that the authorities speak to him under caution and as a suspect in this case."

Mr Donnelly was arrested after speaking at a centenary commemoration of the Meenbanad ambush in Co Donegal, where two republicans were freed from a British Army escort in what is considered one of the first acts in Ireland's War of Independence.

Micheal Cholm Mac Giolla Easpaig, an independent councillor in Donegal who organised the event, said: "We believe Gary Donnelly's arrest to be politically motivated.

"It was a staged arrest, politically motivated and it was to undermine the work of independent councillors like ourselves."

Mr Mac Giolla Easpaig said the arrest warrant was issued on November 22 and Mr Donnelly was a frequent visitor to Donegal and could have been arrested on a number of occasions in the last two months.