Passersby were spotted shouting and heckling outside the home of Peter Mandelson on Tuesday hours after his arrest.
Flanked by suit-clad police officers, the disgraced former minister was led out of his £7.6million property in Camden and taken into custody shortly before 5pm on Monday.
Mandelson, 72, was arrested on suspicion of misconduct in public office - just four days after Andrew Mountbatten-Windsor was sensationally taken into custody on suspicion of the same offence.
Officers have been investigating allegations the politician leaked sensitive information to paedophile financier Jeffrey Epstein during his time as business secretary. Mandelson is understood to deny any wrongdoing.
He spent approximately nine hours being quizzed at Wandsworth Police Station before being granted police bail and returning home, appearing silent and downcast, soon after 2am.
Runners and cyclists were later heard shouting and heckling as they passed the property early on Tuesday morning.
The dramatic development will heap pressure on Sir Keir Starmer, who approved Lord Mandelson as Britain's ambassador to the United States in December 2024 despite longstanding controversy over his relationship with Epstein.
The Government have pledged to release documents relating to the controversial appointment. MPs were told that the first bundle would be published 'very shortly in early March'. But Mandelson's arrest at 4.15pm has now cast doubt over that timeline.
Lord Peter Mandelson returned to his Camden, north London, home shortly before 2am on Tuesday morning
Just hours later cyclists and early-morning walkers were heard shouting and heckling outside the property
The disgraced former minister was arrested on suspicion of misconduct in public office on Monday afternoon
Chief Secretary to the Prime Minister Darren Jones said officials were trawling through a vast quantity of material but intended to release the first tranche imminently.
He admitted it was 'clearly a process that will take some time' given the scale of the request and said documents were being reviewed to ensure publication would not damage 'national security or international relations'.
He added that Scotland Yard had advised against releasing some exchanges between Downing Street and the New Labour grandee for fear of prejudicing any potential prosecution.
Tory leader Kemi Badenoch said: 'Mandelson's arrest is the defining moment of Keir Starmer's premiership.
'It wasn't long ago the PM looked me in the eye at PMQs and said he had 'full confidence' in Mandelson.
'Time to release the Mandelson files in full. We must know who knew what and when. No more delays.'
Shadow Cabinet Office minister Mike Wood claimed that 'the Government's progress moves with the urgency of a tired sloth on a Bank Holiday Monday'.
He added: 'It is time the Government stopped treating Parliament like an inconvenient interruption to their schedule, stopped giving every impression that they have priorities working out whose back to cover, and started providing some actual answers so that we can start to get to the bottom of this murky matter.'
Labour backbencher Andy McDonald referred to the peer as 'the lord of the files', saying: 'There are many people in this place and across the country who would not have touched Peter Mandelson with a bargepole and they're trying to get their head round why on earth this Government wasn't of the same view.'
Downing Street denied reports that corners were cut in Mandelson's security vetting ahead of his Washington posting.
Peter Mandelson has been released on bail after being quizzed late into the night over allegations he leaked sensitive information to paedophile financier Jeffrey Epstein during his time as business secretary
Although his clearance to access top-secret documents was reportedly fast-tracked within weeks rather than months, No 10 insisted full checks were completed.
The Prime Minister's official spokesman said: 'No part of the vetting process was skipped or removed. It is normal procedure for vetting sponsors to prioritise cases based on deployment deadlines.'
Police raids on Mandelson's homes followed the release of three million pages of documents by the US Department of Justice relating to Epstein.
Emails contained within the files are said to suggest that Mandelson, while business secretary and de-facto deputy prime minister to Gordon Brown, and Mountbatten-Windsor, as UK trade envoy, passed potentially sensitive information from official briefings to Epstein.
Documents released in the US indicate Mandelson may have disclosed details of potential policy measures – including an asset sales plan, a tax on bankers' bonuses and a bailout package for the euro – the day before public announcement in 2010. Gordon Brown has accused him of 'betrayal'.
Mandelson has denied any wrongdoing. Following revelations in the Epstein emails, the former minister without portfolio said he had 'no recollection' of receiving payments totalling $75,000 from Epstein between 2003 and 2004.
Epstein is also said to have paid for an osteopathy course for Mandelson's husband, Reinaldo Avila Da Silva, in 2009.
Andrew Mountbatten-Windsor, then the Duke of York, pictured with Lord Mandelson, then the EU's trade commissioner, in Brussels in June 2007
Mandelson stands in white underwear talking to a woman in a bathing robe in a photo though to be snapped in Epstein's Paris home
The peer has insisted he broke no laws and did not act for personal gain, though he has repeatedly expressed regret over his friendship with Epstein, which continued after the financier's 2008 conviction for soliciting sex from a minor.
Last night a spokesperson for Scotland Yard said: 'A 72-year-old man arrested on suspicion of misconduct in public office has been released on bail pending further investigation.
'He was arrested at an address in Camden on Monday, 23 February and was taken to a London police station for interview.
'This follows search warrants at two addresses in the Wiltshire and Camden areas.
'We are not able to provide further information at this stage to prevent prejudicing the integrity of the investigation.'
