Battisti, who faces deportation, was detained in Embu das Artes, a city in the state of Sao Paulo.
Overnight on Thursday he was released pending a decision on whether he is to be deported, his lawyer Igor Sant'Anna Tamasauskas. Battisti will be allowed to stay with his family, he added.
The arrest came after a judge last week ruled that Battisti does not have the right to stay in Brazil, where he sought refuge after his conviction for murder in Italy blamed on an armed Marxist group active in the 1970s.
Battisti spent some 30 years on the run in Mexico and France and came to Brazil in 2004, living in secret before being arrested in Rio de Janeiro.
After four years in confinement, Battisti was released in 2011 and given permanent residency in Brazil.
Prior to last week's ruling, the supreme court had turned down an Italian extradition request, sparking a diplomatic row, and former Brazilian president Luiz Inacio Lula da Silva also had said Battisti should not be extradited.
Battisti says he is innocent and has no intention of leaving Brazil. During his life on the run he became an author of crime novels and other books about his experiences.