The Post understands Sadie Graham was one of two people arrested by Notts police officers last night.
Several police cars and a number of officers remain outside a property in Church Lane, Brinsley.
Coun Graham, now an independent nationalist at Broxtowe Borough Council, was dropped from the BNP in December last year.
A spokeswoman for Dyfed Powys Police said: "We can confirm that Nottinghamshire Police arrested two people as part of a joint investigation with Dyfed Powys Police and the Information Commissioner's Office in conjunction with alleged criminal offences under the Data Protection Act.
"The arrests followed an investigation into a complaint received about the unauthorised release of the BNP party membership list."
The spokeswoman said that an army bomb disposal team was called to the address in Brinsley after a suspicious item was found during a police search of the same property.
She added: "This was purely a precautionary measure and the item was declared safe, with no further reaction required."
The BNP membership list was published on an internet blog last month and was removed after complaints from the party.
It featured more than 12,000 names including addresses, jobs and contact details.
The BNP says the list was based on its 2007 membership list, although a number of names of people who were not, or are not, party members had allegedly been added.
The party said it obtained an injunction at the High Court in Manchester earlier this year, banning the publication of the list.
Speaking last night, a BNP party spokesman said: "Police have confirmed they have arrested two people in the Nottinghamshire area."
Coun Graham left the BNP last year for allegedly being involved in the writing of an internet blog which the BNP claimed had aimed to "attack and smear fellow party officials".
Her expulsion was not heard before a panel and she appealed. At the time, she said: "I am absolutely disgusted by the way they have treated me when I have done nothing but work hard for the party and have been responsible for bringing them forward in the East Midlands.
"I am now an independent councillor for Broxtowe. I would like to assure people that I am still nationalist and still believe in the principles of the BNP, but just disagree with the bad management of the party.
"I work very hard as a councillor and will continue to do so."
Coun Graham was unavailable for comment.Source