Russian Ekaterina Andreeva, 31, was told her outfit was too provocative after she performed at a nightclub by the Nile in Giza.
Police arrested Ekaterina, after a video of one of her latest shows in the country went viral.
Ekaterina, who uses the stage name Gawhara, is seen in a video in a low-cut backless dress split up one side.
She performs an energetic belly dance, jiggling her hips and at one point rotating her boobs to whoops from the crowd.
Police later arrested the dancer on suspicion of inciting young people to disobedience and immorality.
Egyptian prosecutor Hatim Fadl said: “Rules for the dance performance oblige the performer to wear underwear of any colour but beige.
Ekaterina’s friend Anton claims that the company that hired her is already working with lawyers to resolve the issue.
Ms Andreeva runs a successful dance studio in the Russian capital Moscow with her husband.
She has been released on bail of £204 ($US 285).
Local media report that the General Directorate of the Police of Tourism and Antiquities held that Ms Andreeva was wearing a non-standard outfit to dance in and that she had “flaunted” her body.
There were also reports that she did not have a necessary work permit.
The next legal step is not clear but it is reported that she is temporarily banned from dancing.