The Nuggets acquire guard Isaiah Whitehead in the trade, whom they will waive, league sources said.
The deal frees $21 million in salary that potentially saves Denver $43 million in payroll and luxury tax in 2018-19.
Nets general manager Sean Marks continues to replenish Brooklyn's arsenal with first-round picks. Denver's 2019 first-round pick is protected 1-12, and the 2020 second-round pick is unprotected.
In 2017, the Nets traded for DeMarre Carroll, whose salary fetched them a 2018 first-round pick.
The Nets were able to absorb Faried's and Arthur's contracts because of the $1.5 million free-agent cap hold ofJoe Harris. The trade would not have worked had Brooklyn signed Harris to his $8 million cap hit once the moratorium was lifted.
Brooklyn still has $2.6 million in cap space available, with 14 players under contract. The Nets can exceed the cap to sign Harris because of the early Bird exception. The $4.4 million room midlevel exception is reserved for Ed Davis.
ESPN's Bobby Marks contributed to this report.
I.T. lands with Nuggets on veterans minimum deal
Adrian Wojnarowski reports that Isaiah Thomas has signed with Denver on a one-year deal to be the backup point guard.