Reporters Wa Lone, 32 and Kyaw Soe Oo, 28 were detained in December after meeting police for dinner in Yangon and accused of violating the country's Official Secrets Act for possessing material relating to operations in conflict-hit Rakhine state.
They were arrested while investigating a September 2 massacre of Rohingya Muslims in Rakhine, but their report was published while they were behind bars.
Myanmar has been accused of waging an ethnic cleansing campaign against the Rohingya after some 700,000 fled to Bangladesh following a brutal military crackdown on insurgents in August.
The military has denied allegations that the armed forces committed widespread atrocities.
But it has admitted soldiers took part in a massacre of Rohingyas last September in Inn Din village, a murder spree that the Reuters reporters helped uncover.
Seven soldiers were recently sentenced to 10-year prison terms for the killings.
Nonetheless the prosecution of the reporters has continued.
For months now a Yangon court has been hearing testimony to decide whether the Reuters journalists will go to trial even as global criticism of the case has rained down on Myanmar and prominent rights attorney Amal Clooney joined the legal team.
'Tell the whole truth'
Deputy police major Moe Yan Naing said in his appearance Friday that he had been questioned about meeting Wa Lone in November and that his superior then set up a sting in which he told others to pass on sensitive security documents.
"Police Brigadier Tin Ko Ko asked Htauk Kyant (township) police members to arrest Wa Lone after Lance Corporal Naing Lin handed the documents to Wa Lone when they left," he said, describing orders to "get" the reporter.
Kyaw Soe Oo accompanied Wa Lone to the restaurant meeting and was also arrested.
Yangon police officials could not be reached for comment.
Myanmar government spokesman Zaw Htay said in response to questions about the testimony that the case is ongoing and a judge will decide.
Moe Yan Naing said he was angry that his name had been mentioned in the aftermath of the sting as someone who was under scrutiny.
He is facing charges of breaching police regulations and was brought to the hearing from detention.
The prosecution argued that he should be declared a hostile witness as his testimony differed from what he had told police investigators, but the Reuters defence team praised his remarks as genuine.
"He answered all this by taking risk for himself," lawyer Khin Maung Zaw said.
A judge will hear arguments about the motion next week.
In brief comments to AFP as he arrived at the court in the morning, Moe Yan Naing said he was "going to tell the whole truth" in his appearance.
Reuters president and editor-in-chief Stephen J. Adler said in a statement that the court had finally heard the truth and called for the journalists' immediate release.
"One of the prosecution's own witnesses admitted that the police received orders to plant evidence and arrest Wa Lone and Kyaw Soe Oo on false charges," he said.
"This case cannot be squared with fairness or justice, and it's time to bring it to an end."
Myanmar lifted many restrictions on the press as it emerged from five decades of military rule in 2011.
But critics have accused Aung San Suu Kyi's new government of backsliding on previous reforms and failing to protect free expression.
