Muzahim al-Majid denied his brother had been arrested as a suspected fighter, a claim initially made by Allawi on Tuesday.
He also denied an account given by Allawi that Izz al-Din al-Majid was seized in the city of Falluja where he allegedly fought alongside resistance fighters against US and Iraqi forces.
Two witnesses could testify that the arrest took place last week in Ramadi, another town in western Iraq, Muzahim said.
"Izz al-Din has never fought with the rebels or assisted them in any way. He was arrested 18 days ago in Ramadi by US troops, not in Falluja" along with two sons of Shaikh Nayif al-Rashid al-Dulaimi, a Sunni tribal leader, he said.
The Dulaimi brothers were set free two days later "and told us they had been arrested at 11:30pm for breaking a curfew, interrogated by US troops and then released", al-Majid said.
"On the eve of his arrest, Izz al-Din, who had been in Iraq for a few days, received a phone call from Iyad Allawi asking him to join him at a meeting in Amman with Iraqi exiles to discuss the elections," he added.
"Izz al-Din refused and told him the elections were useless,"
"Izz al-Din told him the elections were useless. Surprisingly, he was arrested the next day on the pretext that he carried two passports, an Iraqi one and a Jordanian one"
brother Izz al-Din al-Majid
he said. "Surprisingly, Izz al-Din was arrested the next day on the pretext that he carried two passports, an Iraqi one and a Jordanian one."
On Tuesday, Allawi said Izz al-Din al-Majid was arrested last week in Falluja and would be tried. "The members of the former regime, especially the hardcore around Saddam Hussein, continue to do damage to Iraq and the Iraqis," he said.
Izz al-Din al-Majid, 44, was accused in July by US authorities of helping to organise and arm the "insurgency" in Iraq, according to the New York Times.
He denied the accusations in statements made to AFP in July.
He also served as an officer in Saddam's elite Republican Guards, but defected in 1995 to Jordan with his family and his brother-in-law, Husain Kamil, Saddam's son-in-law of.
Husain Kamil, Izz al-Din's wife and their four children returned to Iraq in February 1996, where Saddam allegedly had them killed. Izz al-Din was in Turkey at the time.
Izz al-Din Kamil in 2000 won refugee status in Britain and has since kept homes in Leeds, the United Arab Emirates and Jordan.