The news came to light at the Police Department's CompStat meeting this morning in the Bayview District, where police Capt. Greg Suhr noted the arrest.
Lee Farley, 39, of Richmond, was shot on July 11 at about 1:40 a.m. outside Jelly's, a Mission Bay dance cafe located on Pier 50.
Police have said that Farley and another man had some interaction inside the club during a private party that night. The gunman is believed to have followed Farley outside, where the shooting occurred.
Police spokeswoman Lt. Lyn Tomioka confirmed today that the suspect, a 32-year-old Solano County man, was arrested Friday in Vallejo.
Tomioka said prosecutors, however, have decided not to file charges at this time pending further investigation.
District attorney's office spokeswoman Erica Derryck confirmed the decision, but could not immediately provide further details.
"This was brought before the DA's office," police homicide Lt. Mike Stasko said today. "Apparently there's just some extra stuff we need to tie up here."
"If he was not the primary suspect in this case, he would never have been arrested," Stasko said.
Following Farley's killing, the Port of San Francisco terminated the club's lease, citing the murder and prior violence, as well as violations of the terms of the lease.
Attorneys for the club have said the venue has been unfairly targeted.
"There've been two homicides, four shootings, in the last two years," police Cmdr. Kitt Crenshaw said today. "That place has to close."
The earlier homicide occurred on Jan. 6, 2008. In that case, 34-year-old Clarence Corbin, of Antioch, was shot dead during a fight outside the club.
Crenshaw has been working with the city's Entertainment Commission to tighten oversight of San Francisco nightclubs.
Crenshaw said that includes "a more focused enforcement regarding clubs, problem venues, problem promoters."
Particularly on Thursday, Friday and Saturday nights, police and representatives from the commission will be checking clubs to make sure they are complying with regulations on security, lighting and video cameras, he said.
The Board of Supervisors on Tuesday approved an ordinance expanding the Entertainment Commission's powers to revoke club permits.
The lease termination for Jelly's is set to go into effect Aug. 18.