The singer, real name Costadinos Contostavlos, was taken into custody along with another man in relation to an incident on the forecourt of a Shell garage in Guildford earlier this year.
Dappy, 24, and a 27-year-old man allegedly approached two girls and three men and asked the girls to go with them.
When they refused, one of the girls was apparently spat at.
A fight is then said to have broken out between Dappy and his friend and another group of up to six men.
A spokeswoman for Surrey Police said: "Police are investigating an incident which happened on the forecourt of the Shell garage in Woodbridge Road, Guildford, on Tuesday, February 28.
"Two girls and three men were outside the garage at 3.30am. They were interrupted by two suspects who had turned up in a car and asked the girls to go with them.
"The invitation was refused and one of the suspects then spat at one of the girls.
"As a result an altercation ensued involving the first two suspects and a further group of up to six black and white men who arrived in two further vehicles.
"The trio of men were assaulted and received serious facial injuries in the attack.
"A 27-year-old man was arrested and is currently on bail until April.
"A 24-year-old man has been arrested and is currently on bail until May."
Anyone with information about the incident is asked to contact Surrey Police on 101.
Dappy performs in N-Dubz alongside his cousin and X Factor judge Tulisa Contostavlos, and Richard "Fazer" Rawson.
He has recently enjoyed success as a solo artist and recorded with Queen guitarist Brian May.
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