The home is located at 902 E. Third Street in Calexico, a border city east of San Diego.
U.S. Immigration and Customs Enforcement investigators said traffickers paid $240,000 for the property and built a brand new $86,000 home with three bedrooms and two bathrooms in April 2015. The home had a hole in the living room giving access to the tunnel.
This is the first time that drug traffickers purchased property and built a house for the sole purpose of hiding a drug tunnel in the area, said U.S. Attorney for the Southern District of California Laura Duffy.
The hole in the Calexico home was around 3 feet wide and led to a shaft, which descended around 32 feet underground, connecting to the tunnel.
The tunnel was 415 yards in length and approximately 300 yards from the border, officials said. It served major drug trafficking organizations south of the border and had been in operation since last month.
The tunnel connected to a functioning restaurant in Mexicali, Mexico.
Bundles of marijuana wrapped in plastic were found inside the tunnel. More marijuana was found at separate stash and warehousing locations in Calexico, totaling over 1,350 pounds with an estimated street value of $6 million.
The four people who were arrested face various charges, including drug trafficking, money laundering and other offenses. Two were taken into custody in Arizona and two in Calexico.
"This house and tunnel were constructed right under the watchful eye of law enforcement. For the builders, the financiers and the operators of these sophisticated tunnels, there is no light at the end of the tunnel. We will seize your drugs and your tunnel before you even have a chance to use it," Duffy said.
Investigators said they've identified a cartel in Mexico but did not release details on whether arrests have been made there.
Over the past five years, federal authorities have discovered more than 75 smuggling tunnels, most of which were in California and Arizona.
ABC News contributed to this report.