A motorcycle officer late Friday night noticed what appeared to be marijuana smoke coming from a Sport Utility Vehicle. Hilton was inside the Cadillac Escalade being driven by her boyfriend, Cy Waits.
The officer pulled the car over near the Wynn resort and casino on the strip. As a crowd gathered and began shooting video and taking photos, police said Hilton asked to go inside the hotel for privacy.
"While in the security office, she extracted a tube of lip balm from her purse," police Sgt. John Sheahan said. "At that time, a plastic bindle containing a substance believed to be cocaine fell from her purse in plain view of the Metro lieutenant. This substance consequently tested positive as cocaine."
Her arrest is the third time the 29-year-old has been suspected of drug possession.
Hilton was detained last month by authorities on a French island after allegedly being caught with less than one ounce of marijuana in her bag.
She was arrested in South Africa during the World Cup on marijuana charges, but the charges were dropped.
"There are only so many times you can use the, 'Officer, this isn't my pocket book,' defense," said Jeanne Wolf of Parade Magazine. "These people are often addicted to illegal substances, but even more importantly, they're addicted to drama, and someone like Paris is addicted to being the center of attention."
Hilton was released about 2:45 a.m.
Hilton's lawyer David Chesnoff released a statement, saying, "Paris Hilton was released this morning on her own recognizance. This matter will be dealt with in the courts not in the media and I encourage people not to rush to judgment until all of the facts have been dealt with in a court of law."
Waits, a 34-year-old night club manager at the Wynn, was booked on suspicion of driving under the influence. He was released on $2,000 bail.
Hilton made headlines just a few days ago when a 31-year-old man armed with knives attempted to break into her house.
In 2007, Hilton pleaded no contest to alcohol-related reckless driving charges. She spent nearly two weeks in jail.