Journalist Jamal Khashoggi died after a fight in the Saudi consulate in Istanbul, the country’s state TV reported quoting an initial probe.
It said deputy intelligence chief Ahmad al-Assiri and Saud al-Qahtani, senior aide to Crown Prince Mohammed Bin Salman, were dismissed over the affair.
US President Donald Trump said what happened was “unacceptable” but Saudi Arabia was a “great ally”.
This is the first time the kingdom has admitted Mr. Khashoggi has died.
Speaking at a round table event, President Trump said the arrests were an important “first step”. He praised the kingdom for acting quickly, and while he said sanctions were an option against the country, he spoke of the possible effect such moves would have on the US economy.
Asked if he found Saudi Arabia’s version of events credible, he replied, “I do.”
Saudi King Salman has also reportedly ordered the formation of a ministerial committee, headed by Crown Prince Mohammed, to restructure the intelligence services.
The journalist was last seen entering the Saudi consulate in Istanbul on 2 October, to pick up paperwork that would allow him to marry his fiancée Hatice Cengiz.
Reports on Saudi state media followed shortly after King Salman spoke on the phone to Turkey’s President Recep Tayyip Erdogan about the case.
Saudi Arabia reportedly acted on information provided by Turkish authorities as part of its inquiry, investigating a number of suspects.
Earlier police in Turkey expanded their search for Mr. Khashoggi’s body, with unnamed officials saying his body may have been disposed of in the nearby Belgrad forest or on farmland.
A statement from Saudi Arabia’s public prosecutor said a fight broke out between Mr. Khashoggi and people who met him in the consulate – ending with his death.
The investigations are still under way, it said, and 18 Saudi nationals have been arrested.
Media reports also spoke of the dismissal of the two senior officials.
Saud al-Qahtani is a prominent member of the Saudi Royal Court and adviser to Prince Mohammed bin Salman.
A White House statement acknowledged the Saudi investigation shortly after the announcement.
It said the US was “deeply saddened” to hear confirmation of Mr. Khashoggi’s death.
Amritsar: India train mows down crowd killing scores
More than 60 people have been killed and 100 hurt after a train ran into a crowd near Amritsar in India’s northern Punjab state, the BBC reports.
The victims were standing on the railway tracks watching celebrations for Dusshera, a Hindu festival marking the triumph of good over evil.
They did not hear the train approach as they watched a firecracker-filled effigy of the demon king Ravana burn.
Children are said to be amongst the dead.
Spectators were watching the effigy burn, and a fireworks display, when many started moving towards the railway tracks a short distance away.
Some reports suggest organisers told people to move away from the firecrackers, while other reports say participants ran towards the track because they were afraid the burning effigy would collapse.
According to eyewitnesses, many on the tracks were busy filming the festivities on their phones, and did not notice the train approaching at high speed.
Police say the noise of the firecrackers and the crowd may have stopped victims from hearing the train.
The train that hit the crowds was travelling from Jalandhar to Amritsar.
An eyewitness told BBC Punjabi that people were “mauled” by the train.
“I removed the bodies from the tracks… my hands were full of blood.”
A local resident told the BBC the celebrations were a regular occurrence: “Every year, people sit on the tracks when festivities take place here.”
Punjab Chief Minister Amarinder Singh described the incident as “absolutely tragic”, and wrote in a tweet that local authorities were being “mobilised”.
“We will do everything possible to assist the injured,” he said, adding: “[I] have directed the district administration to leave no stone unturned to ensure the best possible treatment for them.”
He said that victims would be given medical aid for free.
A state of mourning has been declared – offices and schools in Punjab will be closed on Saturday, Reuters reports.
Prime Minister Narendra Modi described the incident as “heart-wrenching”.