Galole MP Dhadho Godhana was detained and charged on Wednesday over the Tana River clashes, hours after President Mwai Kibaki ordered the prosecution of leaders fanning violence in the troubled region.
"He is in custody... we are investigating him over the Tana River violence and he will be in court later," a police officer at the CID headquarters said moments after the arrest.
CID Director Ndegwa Muhoro had indicated that the MP was under investigation over the violence since last week.
Godhana later appeared in court on Wednesday afternoon where he faced two counts of incitement to violence. He denied the charges and was released on a cash bail of Sh500,000 by magistrate Lucy Nyambura.
He is due back in court on October 2.
An investigation on the MP was initiated last week following orders from acting Internal Security Minister Yusuf Haji who accused him of snubbing meetings he called to discuss with local leaders about security in Tana River.
The MP has been trading accusations publicly with the minister over who is responsible for the violence.
Godhana represents a constituency in the troubled region and he had vowed not to attend any peace meeting convened by the Internal Security Minister.
He had said: "As long as the meeting is called by Haji, I will not attend because he has an interest in the matter."
On Tuesday, the MP called a press conference and said "unless Haji is sacked from the internal security docket, you are yet to see more in Tana River."
The Internal Security Minister had last week called for a police investigation on the MP who was later summoned and questioned by police over the violence.
President Mwai Kibaki who held a meeting with leaders from Coast Province said he had ordered the police to arrest all leaders - both in Nairobi and Tana River who are responsible for the attacks.
Rival members of the Pokomo and Orma communities have been fighting over grazing grounds and water, leading to the deaths of people from both communities