Scott McBride pounced for the opener in the 69th minute and substitute Jack Smith bagged Arbroath's second goal in an injury-time counter attack.
Player-manager Colin Cameron was among the scorers as second-placed Berwick Rangers demolished East Stirling 5-0. Lee Currie, Darren Lavery, Scott Dalziel and John Fairburn were also on the scoresheet. Shire's dismal day was further soured by Michael Bolochoweckyj's red card for elbowing Paul Willis.
Montrose are third after a comfortable 2-0 win over Annan Athletic who are still searching for their first point.
Paul Harkins shot home from the edge of the penalty area in the 32nd minute before a Paul Watson free-kick sealed the points for the Links Park side.
Marvin Andrews was a trialist for Elgin City in their 1-0 win over Clyde, manager Barry Ferguson's first league defeat. Craig Gunn got the only goal after 28 minutes.
At Cliftonhill, Albion Rovers beat East Fife 2-0. Jamie Pollock and John Gemmell netted.