A Moscow court found Browder guilty in absentia of tax evasion in December and sentenced him to nine years in jail as well as ordering the collection of 4.2 billion rubles ($70 million) in unpaid taxes, state-run Tass reported.
Financier William Browder - who is banned from entering Russian Federation - said he was detained in Madrid.
Later on Wednesday, Browder tweeted that he had been released by Spanish police after the "Interpol General Secretary in Lyon advised them not to honor the new Russian Interpol Red Notice".
Browder, the founder of Hermitage Capital Management, wrote in a tweet that he had been arrested in Madrid by Spanish police and was being taken to a police station. "They won't tell me which station", Browder said in a tweet, which include a photo taken from the back of a police vehicle.
His lawyers have appealed the verdict.
In 2013, Browder had been sentenced to the same term in a separate case, but the aggregate term is the same nine years of imprisonment.
Ivan Cherkasov, Browder's co-defendant, also was given an eight-year sentence in absentia. Browder, a British citizen who was born in the US, claims the case against him is politically motivated.
At least five other countries have since implemented sanctions based on the Magnitsky Act.
In October, Interpol rejected Russia's request to arrest Browder, telling member states to ignore an attempt by Moscow to pursue the fund manager through the organization.