The unnamed suspect was freed until 12 April while police continue their investigation.
He had been arrested after “significant new information” came to light.
Stuart Lubbock, 31, was discovered in TV presenter Barrymore’s pool on 31 March 2001 after a party at his then home in Roydon, Essex.
Despite attempts to save him, Mr Lubbock later died in hospital.
Essex Police Detective Superintendent Lucy Morris said on Wednesday new information came to light following a Channel 4 documentary and police appeal with an increased reward.
She told reporters: “The arrest comes after significant new information came to light following our renewed appeal for information and offer of an enhanced reward, which coincided with a major TV documentary broadcast in February 2020.
“This information has led to us making an arrest and over the coming days we will be contacting all those who were present at the party at the time as well as others who may have information.”
She added: “We have never given up on finding out exactly what happened to Stuart and we will not stop in our pursuit of justice for him and for his family and friends.
“Nine people were at that party. We know that not everyone was responsible for what happened but someone was. Now is the time to come forward, if you haven’t done so already, to set this matter to rest by providing us with any information you have.”
The man, who was detained, was arrested “in connection with the indecent assault and murder of Stuart Lubbock”, the force said in a statement earlier.
Mr Lubbock’s father Terry, 76, said: “There is just so much going on in my head. I can’t get my head around it. Of course I’m happy. Of course this is good news. But it’s been 20 years. This has nearly killed me.”
Harry Cichy, a friend of the Lubbock family, added: “I’m pleased. Of course this is progress. We can only hope it leads to justice for Stuart after all these years.”
Barrymore, now 68, was arrested over the death in 2007 and never charged.
He then sued Essex Police, claiming a wrongful arrest cost him about £2.5m in lost earnings, but Court of Appeal judges determined he should get nominal damages.
In 2009, the police watchdog published the findings of a review of the investigation into Mr Lubbock’s death, concluding that officers missed crucial evidence and did not ensure vital forensic tests were completed until six years later.
Butcher Mr Lubbock was at the get-together with eight other people.
A post-mortem examination showed he had suffered severe internal injuries which suggested he had been sexually assaulted.
Alcohol, ecstasy and cocaine were found in his bloodstream.
Barrymore was criticised for leaving his home soon after Mr Lubbock was found floating in his outdoor pool.
The entertainer also said he could not jump in and try to save Mr Lubbock because he could not swim, a claim disputed by others who knew the star.
He also came under fire for failing to answer questions at Mr Lubbock’s inquest in 2002.
The coroner recorded an open verdict.
Barrymore – who became a household name for shows such as Strike It Lucky – has always denied involvement in the death.
His television career collapsed in the wake of the allegations, although he enjoyed a brief return to the spotlight during a stint on Celebrity Big Brother in 2006.
He has repeatedly denied any wrongdoing, last year saying: “I have had nothing to do with this whatsoever and yet I keep getting bashed and bullied by the media.”