Police said he was arrested after a woman complained that he had indecently exposed himself.
Dyer, 27, had been released on police bail without charge pending further investigation, sources said.
The investigation centred on an alleged incident at a hotel in Norwich earlier this year, sources said. A spokeswoman for Norfolk Police would only say a 27-year-old man had been arrested and released on police bail by officers investigating an allegation of indecent exposure.
She refused to confirm or deny whether the man was Dyer.
Dyer moved to Newcastle from Ipswich for £6million in 1999 and has been involved in all manner of off-field incidents. And this is not the first time he has been caught with his pants down.
His hotel room was used in a rape case incident, he was alleged to have videoed young girls having sex when he was on holiday, he was caught urinating in the street, crashed his Ferrari on a Newcastle bridge, was involved in a punch up with Lee Bowyer, and the list goes on and on ...