Navalny had urged protesters to gather in Manezh Square near the Kremlin after his brother was sentenced to jail.
Police detained Navalny at the protest and took him home, where he has been under house arrest since February.
He says the legal cases against him and his brother are motivated by his opposition to President Vladimir Putin.
Hours earlier, a court in Moscow handed Alexei Navalny a suspended prison sentence of three-and-a-half years for defrauding two firms. His brother Oleg was given a three-and-a-half-year custodial sentence for the same offence.
Navalny accused authorities of trying to punish him by jailing his brother, and called for his supporters to gather in central Moscow in protest.
Around 2,000 people gathered in temperatures below -10C.
Anti-corruption activist Alexei Navalny is Russia's most well-known opposition figure
Navalny tried to reach Manezh square but was arrested before he could reach the rally
At least 171 protesters were detained by police, said rights group Ovd Info
Pro-government protesters are staging a counter-demonstration nearby, our correspondent Steve Rosenberg reports.
At least 171 people were detained by police said OVD Info, a campaign group that monitors political detentions. However there was no official confirmation of the number of arrests.
'Take to the streets'
After the sentencing of his brother on Tuesday morning, a visibly shocked Navalny called on his supporters to "take to the streets".
Navalny released a selfie on the way to the rally
Upon arriving at the rally, police detained the opposition leader and drove him to his house in a police van.
He said he was not allowed out of his flat and that five soldiers stood guard outside.
After his arrest, Navalny sent a tweet saying that he "had not got as far as the square".
"I call on everyone not to leave until they are forced to," he said. "They cannot arrest everyone".
Just before his arrest, he told reporters that his motivation was "not my brother, my family, myself or some specific people" but "this disgusting outrage that has been going for many years".
Prosecutors had demanded 10 years in prison for Alexei Navalny and eight years for his brother Oleg. One prominent MP from President Putin's United Russia party said they should launch an appeal for a stronger sentence.
In court - Steve Rosenberg, Moscow correspondent
Alexei Navalny's younger brother Oleg was sentenced to jail for three-and-a-half years
Alexei Navalny is the opposition figure the Kremlin fears most. The case against him was widely seen as politically motivated.
And because his brother was also on trial he had accused the authorities of trying to take his family members hostage to get at him.
Alexei was visibly shocked by the sentence. "Why are you jailing him [Oleg]?" he shouted at the judge. "Just to punish me even harder?"
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