The 69-year-old comedian was detained at his Warwickshire home on suspicion of sexual offences and taken into custody at a local police station.
He recently was forced to deny claims by a woman called Karin Ward that he tried to grope her in 1974 when she was a 14-year-old schoolgirl.
Starr is the second celebrity arrested in connection with the unfolding Savile abuse scandal after 1970s glam rock star Gary Glitter was questioned by police for 10 hours on Sunday.
The inquiry into claims Savile abused hundreds of young girls before his death last year took a new direction after people came forward to claim they had been abused by other famous names, some of whom were still alive.
The Metropolitan Police have confirmed a man in his 60s has been arrested as part of Operation Yewtree.
The officer in charge of the investigation has previously described how he is categorising the hundreds of lines of inquiry he is dealing with, saying they break down into three categories: Savile on his own; Savile and others; and others. A police spokesman said: "The individual falls under the strand we have termed Savile and others."
Starr – who lives with fiancée Sophie Lea, 34 – was implicated after Mrs Ward alleged on an ITV documentary that he had groped her when she had appeared on the television show Clunk Click with Jimmy Savile in the 1970s.
Starr admitted he did appear on the show after footage was broadcast of him with Mrs Ward, but he remained vociferous that he had done nothing wrong.
His lawyer said following the programme: "Freddie is now 69 and cannot be expected to recollect every show he has appeared on and to remember every person that he has met. When the allegation made by Karin Ward was put to him, Freddie's first reaction was he would never grope a women and never has.
"His recollection was that he had not been on a Jimmy Savile show and when he contacted the person who was his manager in the 1970s, he also could not remember Freddie appearing on any of his shows.
"In respect of Karin Ward this was not a name Freddie could remember and therefore had no recollection of meeting her.
"It would now appear from seeing footage of a Clunk Click show aired in 1974 that Freddie was mistaken and therefore that he had in fact been on a Jimmy Savile show.
"However, Freddie vigorously denies the awful allegation that has been made by Karin Ward, which despite this footage is still totally unsupported and uncorroborated by any other evidence."