Mr Tatchell was holding a banner supporting gay men who have been violently targeted in a purge in Chechnya while standing next to the statue of Marshal Zhukov close to the Kremlin.
The gay rights campaigner was taken into custody in Moscow over his one-man protest against horrifying human rights abuses against gay men in Chechnya.
Several police officers moved in to detain him and told him he had broken the law in Russian Federation.
Mr Tatchell was allowed to walk to a nearby police vehicle where he was initially questioned before being driven away to a police station.
About two hours later on Twitter, Tatchell said he'd been released and was to appear in court on June 26. During a 2007 gay-pride parade in Moscow, he was beaten by an antigay protester.
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Chechen President Ramzan Kadyrov, a close confidant of Russian President Vladimir Putin, has regularly dismissed the claims, saying they can not be true because there are no gays in Chechnya.
He said: "Unlike courageous Russian protesters, I have the "protection" of a British passport, which means I have been treated more leniently than they are".
Russian officials have said the rainbow flag would be allowed at World Cup venues, even though a 2013 law bans so-called "propaganda" of homosexuality to under-18s.
After his release, Tatchell issued a statement on his foundation's website describing what happened after he was detained.
"This time I'm here for the World Cup - but unlike thousands of fans, I won't be cheering on this festival of football", Tatchell wrote.
He says he has written a letter to the Chief of Police of Kitay-Gorod police district, requesting his court appearance is voided on the grounds he flies back to the United Kingdom on 18 June. I presume I was well treated, partly because I am a United Kingdom citizen and because a senior British Embassy consular official, Colin Wells, contacted the police.
Despite warnings from LGBT watchdogs worldwide, the President of the Russian LGBT Sport Federation, Alexander Agapov, is showing LGBT pride by waving his rainbow flag at Moscow's Luzhniki Stadium during the World Cup against Saudi Arabia.