Arun Valmiki, who was arrested late last night and "admitted to having damaged the statue in a drunken state along with two friends on Wednesday was released in the morning," Senior Superintendent of Police P C Meena said.
His two associates have not yet been arrested, he added.
Residents of Ambedkar basti in Kakadeo where the statue was damaged, however, claimed Valmiki had not returned home, and he may have "gone underground" fearing police action.
They alleged he was falsely implicated to protect the "real culprits", and the police probe was moving on the wrong track.
Irked by Valmiki's arrest, they earlier went on a rampage, brickbatting several vehicles and damaging a private bus and a station wagon, Meena said.
He said a group also tried to torch a few vehicles, but the police reached there and prevented them, Meena said.
Keeping in view the prevailing tension, a heavy police contingent was deployed in the troubled areas, he said and claimed the situation was gradually returning to normal.
Republican Party of India chief and MP from Maharashtra Ramdas Athavale was scheduled to arrive in the evening to ascertain facts about the entire episode before raising the matter in the Parliament.
Mumbai: Calm after the storm
Situation returned to normalcy in Mumbai and other parts of Maharashtra, which witnessed violent agitations yesterday following the desecration of Dr Babasaheb Ambedkar