Dubai-based Al Arabiya television said police on Monday had released its correspondent Ahmad al-Salih, who along with many other reporters has been covering fighting between US occupation forces and fighters loyal to Shia leader Muqtada al-Sadr.
"We don't know yet why they arrested him, but they have released him," said editor Abd Al-Sattar Ellazan, adding Salih would continue to cover events in Najaf.
Witnesses said police who came to the hotel threatened the reporters.
"We will kill you if you leave the hotel. I will put four snipers on the roof to shoot anyone who leaves," a police lieutenant said.
Police then fired into the air and pointed their guns at the hotel, witnesses said.
On Sunday, Najaf's police chief told local and foreign media to leave the city, but government officials in Baghdad denied there would be a crackdown on the media covering the 12 days of fighting.
Media in Najaf are under
pressure from Iraqi authorities
Police chief Ghalib al-Jazairi told foreign and Iraqi reporters at a hastily called late evening news conference they were not under threat, but added that an order calling on journalists to leave the city was still technically in place.
"You are not under any kind of threat. We respect your job, we respect the press" he said.
"The order is still technically valid but I have contacted the Ministry of Interior this morning and told them this sounds unreasonable to have a city with no media. This will turn against us."
He said the press was making the fighters of the al-Mahdi Army to be heroes.
"We want to win the battle as soon as possible," the police chief said.
The media were "intervening and bringing more support to this militia and encouraging them to keep fighting, and giving a false image that shows these criminals as heroes and nation builders", he said.
Earlier, Human Rights Watch warned the expulsion of journalists from Najaf raised serious concerns for civilians.
"The ban on press coverage raises concern that combatants could disregard their obligations to protect civilians"
Sarah Lean Whitson,
Human Rights Watch
The New York-based watchdog on Monday said combatants free from international press scrutiny might fail to protect Iraqi civilians. It also warned media coverage of the fighting might be confined to journalists "embedded" with US military units.
"Forces fighting in built-up areas like Najaf must take all precautions to avoid harming civilians and not use weapons, whether sophisticated warplanes or common mortars - indiscriminately," said Sarah Leah Whitson, executive director of Human Rights Watch's Middle East and North Africa division.
"The ban on press coverage raises concern that combatants could disregard their obligations to protect civilians," she added.
Human Rights Watch also rebuked the US military for claiming 360 fighters were killed after heavy fighting in the city on 5 August without addressing "the question of civilian casualties".
Press freedom watchdog Reporters Without Borders also demanded that the Iraqi government should immediately reverse the expulsion order on journalists.