Peter Mandelson's lawyers have said claims he was arrested because he was a flight risk are "baseless".
The former Labour peer was detained on Monday under suspicion of misconduct in public office, and released later the same evening.
Sky News understands the Metropolitan Police arrested him because they had been told he was preparing to flee the UK for the British Virgin Islands.
They had originally planned to interview Mandelson, 72, under caution, without arrest in a fortnight's time. It is understood that going through devices obtained from searching his two homes in Camden, north London, and Wiltshire, was proving very time-consuming.
But after police conducted a series of interviews about the flight risk claims they decided they needed to arrest him this week.
Mandelson has denied any wrongdoing.
Mishcon de Rey, lawyers for the former British ambassador to the US, said: "Peter Mandelson was arrested yesterday despite an agreement with the police that he would attend an interview next month on a voluntary basis.
"The arrest was prompted by a baseless suggestion that he was planning to leave the country and take up permanent residence abroad.
"There is absolutely no truth whatsoever in any such suggestion.
"We have asked the MPS for the evidence relied upon to justify the arrest. Peter Mandelson's overriding priority is to cooperate with the police investigation, as he has done throughout this process, and to clear his name."
Lord Mandelson was bailed in the early hours of Tuesday morning after about eight hours of questioning.
It is not clear if he had to surrender his passport, but that is usually a condition of bail in such cases.
Read more: Mandelson's 'vile' Epstein emails make me 'angry', foreign sec says
He was sacked as ambassador in September after details emerged about his continued contact with disgraced paedophile Jeffrey Epstein.
Mandelson then resigned from the House of Lords in early February amid growing public and political scrutiny after the US Department of Justice's latest publication of Epstein files last month.
(c) Sky News 2026: Mandelson's lawyers say his arrest due to 'baseless' flight risk claim
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What is misconduct in public office?
