The 75-year-old English woman who stole a quilt which was on display at the Lakes District Museum on Monday, told police she put it in a rubbish bin after taking it.
The woman was part of a tour group which stopped in Queenstown and Arrowtown before travelling to Milford Sound and staying in Te Anau.
The woman was arrested at 9pm on Wednesday by Te Anau police.
A CCTV video clip of the woman putting the piece by Queenstown artist Alison Naylor into her bag received widespread coverage.
After paying the quilt's value of $625 in reparation, which Ms Naylor will receive, the woman was released with a pre-charge warning.