An Italian LGBT activist and former member of parliament who was arrested in Sochi while protesting Russia's anti-gay propaganda law has been freed, activists said.

Vladimir Luxuria, a transgender who served as lawmaker with Italy's Communist Party was held by police in the southern Russian city hosting the Winter Olympics as she was waving a rainbow flag saying "Gay is OK" in Russian. She was released after a few hours.

"I've been freed and tomorrow I'll watch the Games," Luxuria, 48, wrote in a SMS message to the Gay Centre, Fabrizio Marrazzo a spokesman for the LGBT community told ANSA news agency.

Luxuria, who is also a television personality, was in Sochi to shoot a report on the Olympics with two journalists from TV show Le Iene.

The reporters posted on Facebook a photo of Luxuria making the victory gesture upon release.

"They freed her. Everything is alright," they wrote.

Meanwhile the Italian foreign ministry dismissed initial reports that Luxuria was ill-treated by police.

"Vladimir Luxuria is well. She wasn't the subject of threats or violence by police, "a Ministry spokesman said. "She told us on the phone she was treated kindly."

Luxuria was the first transgender ever to be elected at the Italian parliament, where she served as MP from 2006 to 2008.

Hours before being detained, the LGBT campaigner tweeted a photo of herself at the Sochi Olympic park with a rainbow-coloured fan and parasol.

"I'm in Sochi. Greetings in the colours of the rainbow, in Putin's face," she wrote.

Luxuria said she planned to attend a hockey match at the Bolshoy Ice Dome fully dressed in rainbow colours as a protest against Russian president Vladimir Putin.

"The goal, of course, is to protest against the law of homophobic Putin," she told Ansa before leaving for Sochi.

Her detention was condemned by LGBT groups and activists around the world.

"Rebellious, free, unafraid of the state's morality police. Thank you, @vladiluxuria," tweeted Nichi Vendola, the gay leader of Italy's Left Ecology Freedom (SEL) party.

Sochi organisers said they had no information about the incident.

"We've talked to police and they have told us there is no record whatsoever to any detention or arrest," Sochi organising committee spokeswoman Alexandra Kosterina said.