The inquiry follows the discovery of the dismembered body parts of up to 30 people at his studio and at a site in Kent. Forensic scientists are trying to identify the remains, which are thought to have been removed from hospital medical schools.
Kelly, 41, a former abattoir worker and butcher and a nephew of the Duke of Norfolk, has previously admitted smuggling pieces of human corpses into his studio in Clapham, south London, and using them to make plaster casts. The investigation is believed to have been prompted by a complaint from a member of the public that he recognised the face of an elderly man in a silver-coated piece of Kelly's work.
The piece, involving the head and face with part of the brain cut away, carries a price tag of pounds 4,500 and was displayed at the Contemporary Arts Fair in north London in January. It did not find a buyer. He has previously admitted: "I'm a little bit worried about the old man in case someone recognises him."
Kelly has recently been lecturing twice a week at the Prince of Wales Institute of Architecture. The Institute yesterday declined to comment on his position.
A Scotland Yard spokesman said: "Following a request by Her Majesty's Inspectorate of Anatomy, officers from the organised crime group are investigating allegations of theft and burying of bodies without consent.
"A search is being carried out in south London and at a venue in Kent where a number of body parts have been found." Kelly was first arrested on 2 April.
He has never revealed the source of the body parts but recently told the Independent on Sunday: "To get them was a sweat, under the cover of darkness. I had the police on me once because someone had tipped them off."
Kelly, who works in a studio characterised by plaster casts of elderly human torsos hanging from walls, says his aim is to challenge notions that health and life are the prerequisites of beauty. He has argued that his art immortalises the dead and said: "I would not wish to hurt anyone. While I find beauty in death, these are nevertheless rotting bodies. You look at them and remind yourself, this is how we all end up."
Kelly yesterday said: "I'm helping police as much as I can and I cannot say anything else at the moment."
The art of controversy
Damien Hirst: First stirred public consciousness by presenting a sheep pickled in formaldehyde.
Gilbert and George: Provoked outrage with artistic experiments involving wrinkly nudity and an excremental fetish which included huge pictures of human excrement.
Jake and Dinos Chapman's Art of the Repellent, involves mutant mannequins refashioned to look like products of failed biogenetic experiments.
Actress Tilda Swinton spent eight hours a day sleeping on a mattress in a glass case at London's Serpentine Gallery.Reuse content