Police reportedly stopped a kidney transplant procedure at the L H Hiranandani hospital after finding that documents showing the donor was married to the intended recipient were forged.
They said the woman giving up her kidney was being paid, according to the Press Trust of India news agency.
Organs can only be donated by close relatives or by non-relatives approved by a special committee in India, and buying and selling them is illegal.
“We have arrested the chief executive of L H Hiranandani hospital, Sujit Chatterjee, and four doctors,” said Mumbai police spokesman Ashok Dudhe.
They have been remanded in custody until Saturday, he added.
It is not the first such case — in June Indian police said they had uncovered an illegal organ donation racket run out of a top New Delhi hospital.
That case also involved forged documents showing that the donors and the recipients were related.
Staff at the Apollo hospital were arrested, although its management denied any role and said it was the “victim of a well-orchestrated operation to cheat patients and the hospital”.
Millions of Indians suffer from kidney disease, mostly because of high rates of diabetes.
But a chronic shortage of organs available for transplant has fuelled a black market.