He was arrested for felony assault with a deadly weapon -- a gun -- and for a warrant for driving on a suspended license, Los Angeles police said.
Det. Gus Villanueva said the arrest stemmed from an incident that occured at a "public venue" in the LAPD Southwest Division, police said. Police said the investigation is ongoing.
Details were not immediately available.
"It's still under investigation by Robbery Homicide Division, Robbery Special Section," Villanueva said. "It will eventually be presented to the district attorney's office once the investigation has been completed."
Knight, 45, was pulled over in a white Cadillac Escalade on Crenshaw Boulevard in Gardena at about 12:30 a.m. and handed over to Los Angeles police. He was booked for the felony assault with a deadly weapon and a misdemeanor warrant, LAPD Officer April Harding said.
Knight was booked into Men's Central Jail. He posted $65,000 bail Thursday morning.
Knight, who spent several years in federal prison, co-founded Death Row Records and helped launch some of rap's biggest acts, including the seminal NWA, Snoop Dogg and the late Tupac Shakur. Knight was with him the night he was killed in 1996.