Ex-News International chief executive Rebekah Brooks has been arrested by police investigating phone hacking and bribery at the News of the World.
The 43-year-old was arrested by appointment on Sunday on suspicion of conspiring to intercept communications and on suspicion of corruption.
Mrs Brooks, who has denied wrongdoing, was released at midnight.
She quit News International on Friday as pressure mounted over her role in the deepening hacking scandal.
Mrs Brooks was editor of the paper between 2000 and 2003, during which time the phone belonging to murdered schoolgirl Milly Dowler was tampered with.
BBC Business Editor Robert Peston said News International was not aware that Mrs Brooks would be arrested when her resignation was being discussed at the company on Tuesday and Wednesday of last week. She eventually resigned on Friday.
Our correspondent added: "It's certainly the most extraordinary development. Rebekah Brooks is incredibly close to the most powerful people in the UK - the current prime minister, the previous prime ministers Tony Blair and Gordon Brown. More or less every senior person of influence within Britain."
He said it could now potentially jeopardise her appearance at the Culture, Media and Sport Select Committee on Tuesday, where she is due to answer MPs questions on the hacking scandal.
"I would assume having been arrested it's now almost impossible for her to appear. It's very difficult for MPs to ask her questions that wouldn't be seen to be impinging on the police investigation," he added.
A spokesman for Mrs Brooks says the Met police notified her on Friday, after her resignation had been agreed, of an appointment with its officers.
"She had been told as early as a week ago that she wasn't on the radar, then suddenly on Friday there was a request to meet," he said.
"She attended today and it was quite a surprise to her on her arrival to be arrested. She was going, anticipating to help with their inquiry."
He also said her arrest would make her appearance at the committee "pretty tricky".
She had been offering to speak to police on voluntary basis since January, so she was "very surprised" to learn she would be arrested, he added.
Her former boss, News Corp chairman Rupert Murdoch, and his son James Murdoch, chairman of News International, are also due to appear before MPs.
In other developments:
- Home Secretary Theresa May is to tell MPs about her "concerns" over the Metropolitan Police's hiring of ex-News of the World journalist Neil Wallis, who is currently on bail over phone hacking allegations
- Call to cut back Murdoch empire
- Tom Watson MP has written to the Serious Fraud Office asking it to investigate payments made by News International following the original phone hacking case, raised in 2007
Liberal Democrat MP Adrian Sanders, a member of the select committee, questioned the timing of the latest arrest.
"In whose interest was it for this arrest to take place before Tuesday? Because if it does impede what we can ask, that's not going to go down well with my fellow committee members.
"Quite why now, just a few hours before our select committee meets, an arrangement has been made for an arrest. A lot of people are going to think this is very, very odd.
"If this is designed to take the spotlight off the police at the same time giving a shield to Rebekah Brooks, that's a very serious matter indeed. We don't know how much this is going to impede our questioning until we've been able to sit down and talk it through with the parliamentary counsel."
Another member of the select committee, Labour MP Jim Sheridan, said he hoped her arrest would not affect her appearance before MPs.
"The police will do whatever it is they feel necessary to do, and if they feel it's necessary to arrest Rebekah Brooks at this time, then so be it.
"I don't buy into the conspiracy theories that the police are doing something underhand. I think it's just that if they feel it necessary, then so be it. Their inquiry, it's far, far more important than any other inquiry."
Labour MP Chris Bryant, who believes his phone was hacked, also has concerns about the timing of the arrest.
"It may be that the police are wanting to protect evidence so that... they can lead to successful prosecutions, but there will be plenty of people who are saying, right, this is an opportunity for her to get out of saying things to the culture committee.
"In the end, of course, the police investigation is the most important part of what we've been trying to seek for a long time, so we do get to the bottom of the criminality at the News of the World."
Mrs Brooks's arrest is the 10th made by Operation Weeting police, who are conducting the current investigation into phone hacking.
She was released on bail until October.
Others arrested and bailed have included ex-NoW editor Andy Coulson, ex-NoW assistant editor Ian Edmondson, ex-NoW chief reporter Neville Thurlbeck, senior ex-NoW journalist James Weatherup, freelance journalist Terenia Taras, Press Association journalist Laura Elston, an unnamed 63-year-old man, and ex-NoW royal editor Clive Goodman.
Officers from Operation Elveden were also involved with this latest arrest. They are investigating allegations of inappropriate payments to police, under the supervision of the Independent Police Complaints Commission.