Few details were available, but police spokesman Jeff Lee said Avenatti was in the process of being formally booked.
No one was available for comment at Mr Avenatti’s law office in Newport Beach, south of Los Angeles.
The attorney rose to prominence as the lawyer for Ms Daniels, an adult actress whose real name is Stephanie Clifford.
She sued Mr Trump for defamation after he denied her assertion that she had a sexual encounter with him in 2006, but her lawsuit was dismissed by a federal judge last month.
Ms Daniels has filed a separate lawsuit over a $130,000 (£100,000) in hush-money agreement stemming from the alleged encounter. Mr Trump has denied having an affair.
The lawyer recently mooted a run for president in an interview with Time magazine.
Calling on the Democrats to back him, he said he believed he would be one of the few potential candidates that can “push back” against Mr Trump.
“Look, I can be aggressive at times,” he said. ”I didn’t get to where I am by being a pushover, okay. I don’t generally go after people offensively, but if somebody comes after me, I will absolutely meet them every step of the way and then some, no question.”
U.S. stocks fell as financial stocks were hit by fears of tightening regulations on the banking industry. Jade Barker reports.