Taane was performing at lluminati on Harrington Street early on Sunday when police arrived to carry out a standard inspection of the club, Sunlive.co.nz reported.
A number of concertgoers alleged he began singing "**** the police" while officers did their inspection.
His manager and sister Nina Taane said he was arrested near closing time about 3am.
She said other people were arrested with him.
"We just hope everyone who was there is okay. It will all come out eventually."
One person who did not want to be named said "things got out of hand" when police approached him.
Taane, a former member of leading New Zealand band Salmonella Dub, is best known for his number one solo hit "Always On My Mind".
He is due to appear in Tauranga District Court on Friday.
