She had been accused over the weekend by a newspaper, who claimed she had introduced their reporter to a drug dealer, reported Daily Mirror.
It was said the drug dealer then sold half an ounce of cocaine to them at London's Dorchester Hotel. Contostavlos' management declined to comment.
Asked about reports that Contostavlos had been arrested the Met Police said, "Officers from Westminster have arrested two people - a 35-year-old man and a 24-year-old woman - on suspicion of supplying class-A drugs."
The 35-year-old who was arrested and bailed along with Contostavlos is a rapper called Mike GLC.
Meanwhile, the singer recently confirmed on her Twitter account that she would no longer sit as a judge on 'The X Factor'.
Before joining 'The X Factor', Contostavlos rose to fame with the band N-Dubz. She, along with bandmates Dappy and Fazer, had hits with singles including 'Morning Star', 'Girls' and 'Best Behaviour'.