Sources said the musician, who found fame in the 1980s with hits including Police Officer, is understood to have died from self-inflicted wounds when officers swooped on his home in east Surrey.
The police watchdog has been called in to investigate the death.
Smiley Culture, real name David Emmanuel, appeared on Top of the Pops in the 1980s with singles including Cockney Translation and Police Officer.
A Scotland Yard spokeswoman said: "As part of an ongoing operation officers from the Metropolitan Police Service’s Serious and Organised Crime Command today attended a residential address in east Surrey to make an arrest.
"While they were at the address, an incident occurred during which a 48-year-old man died. Officers from Surrey Police attended the incident and it has been formally referred to the Independent Police Complaints Commission."
The Independent Police Complaints Commission confirmed it was investigating.
In September last year, he appeared before magistrates charged with conspiracy to supply cocaine.
His 1984 hit single Police Officer was an autobiographical song of how he was caught in possession of cannabis but let off when the officer recognised him as a reggae artist.
Speaking about the hit, he told the Guardian last year: "My hit single Police Officer was a true story – the police used to take my weed. It was better than being arrested, and I made that into a hit."