The Russian opposition leader had urged protesters to gather in Manezh Square near the Kremlin after his brother, Oleg Navalny, was sentenced to jail.
Police detained Alexei Navalny at the protest and took him home, where he has been under house arrest since February.
Alexei Navalny says the legal cases against him and his brother are motivated by his opposition to President Vladimir Putin.
Hours earlier, a court in Moscow handed Alexei Navalny a suspended prison sentence of three-and-a-half years for defrauding two firms. His brother Oleg was given a three-and-a-half-year custodial sentence for the same offence.
Alexei Navalny accused authorities of trying to punish him by jailing his brother, and called for his supporters to gather in central Moscow in protest.
Around 2,000 people gathered in temperatures below -10C.
Pro-government protesters are staging a counter-demonstration nearby.
At least 171 people were detained by police said OVD Info, a campaign group that monitors political detentions. However there was no official confirmation of the number of arrests.
Upon arriving at the rally, police detained Alexei Navalny and drove him to his house in a police van.
He said he was not allowed out of his flat and that five soldiers stood guard outside.
After his arrest, Alexei Navalny sent a tweet saying that he “had not got as far as the square”.
“I call on everyone not to leave until they are forced to,” he said.
“They cannot arrest everyone.”
Just before his arrest, Alexei Navalny told reporters that his motivation was “not my brother, my family, myself or some specific people” but “this disgusting outrage that has been going for many years”.
Prosecutors had demanded 10 years in prison for Alexei Navalny and eight years for his brother Oleg.
Alexei Navalny has been under house arrest since February as part of a separate five-year suspended sentence for the alleged theft of 16 million rubles from a timber firm in 2009.
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