Marion "Suge" Knight has been arrested on suspicion of murder in connection with a "fatal traffic incident", the Los Angeles County Sheriff says.
He is being held in West Hollywood on bail of $2m (£1.3m).
The record producer had earlier surrendered to police after he was declared a suspect in a hit-and-run incident where one man died.
Another man was injured and although he is currently in hospital, his condition is not yet known.
Around 15:00 (23:00 GMT) on Thursday, a man fitting Knight's description drove to a burger shop and began arguing with two people, said Lt John Corina of the LA County Sheriff's Department.
The driver then backed into one of the victims, before running them both over.
The Death Row Records founder is said to have left the scene in a red Ford pickup truck, the police said.
Knight, 49, was involved in an earlier fight with the pair at a different location, Lt Corina added.
One of the victims died in hospital, according to the Sheriff's Department statement - while the condition of the second victim, who was also taken to the hospital, has yet to be confirmed.
A lawyer for the rap music legend seemed to confirm Knight had been driving at the time, but claimed it was an accident and he was running away from attackers.
"He was in the process of being physically assaulted by two men and in an effort to escape he unfortunately hit two (other) individuals," James Blatt said.
"He was in his car trying to escape."
Knight founded Death Row Records in the 1990s, but later declared bankruptcy and the company was auctioned off.
He helped launch the careers of artists including Dr Dre, Tupac Shakur and Snoop Dogg.
Last August he was shot six times at a nightclub in Los Angeles. No arrests have been made.
In November, he pleaded not guilty to a robbery charge filed after a celebrity photographer accused him of stealing her camera in Beverly Hills.
He could face up to 30 years in prison because of previous convictions.
The music boss has previously been convicted of armed robbery and assault with a gun.
He has also served time for violating probation.
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