The former midfielder, who made 270 appearances for the Old Trafford club and won 39 England caps, is now head of coaching at United's youth academy.
The woman was reported to have suffered a small cut to her hand and did not require hospital treatment.
He was heralded as part of Manchester United's famous "Class of 92", along with David Beckham, Ryan Giggs, Gary Neville, Phil Neville and Paul Scholes, who came through the club's youth academy.
The former United, who made 387 appearances for the club between 1992 and 2004, was appointed head of the club's academy in 2016 and has overseen the development and subsequent emergence of a number of youth players.
Butt was being questioned last night at Altrincham Police Station, the Daily Telegraph understands.
Nicky Butt won six Premier League titles, three FA Cups and one Champions League title at Manchester United.
Police were called to the property on Broadway at around 2pm this afternoon to reports that a woman had been assaulted.
Butt, born and raised in the Manchester suburb of Gorton, married Shelley Barlow in 2008.
"A 44-year-old was arrested on suspicion of assault and has been bailed pending further inquiries".