Daniels, whose real name is Stephanie Clifford, was arrested in a Columbus, Ohio, club for allowing a customer to touch her in a non-sexual manner while on stage, lawyer Michael Avenatti said on Twitter.
Avenatti said Daniels was arrested during a sting operation.
"This was a setup & politically motivated. It reeks of desperation. We will fight all bogus charges," Avenatti said on Twitter.
Daniels was scheduled to perform at Sirens Gentlemen's Club on Wednesday and Thursday, according to its website.
Avenatti said Daniels was performing the same act on Wednesday that "she has performed across the nation at nearly a hundred strip clubs."
He said he expected his client to be released on bail and that she would be charged with a misdemeanor for allowing touching.
"We will vehemently contest all charges," he said.
Daniels has said she had sex with Trump in 2006 and that Trump's personal lawyer, Michael Cohen, paid her $130,000 to keep the encounter secret shortly before the presidential election.
Cohen has said he made the payment. In May, Trump said Daniels was paid to stop "false and extortionist accusations" she made about a sexual encounter with him.
Trump forcefully denied the affair.
Daniels has filed two lawsuits against Trump, one to get out of a non-disclosure agreement she had signed in October 2016 ahead of the November presidential election in exchange for the $130,000, and another for defamation.
