Mark Chase was arrested about noon when he attempted to set up an area where he could paint at Light and Pratt streets.
A police spokesman confirmed the arrest but said further details were not yet available.
Video viewed by The Baltimore Sun shows police telling Chase that he could not paint without a permit. Two officers on bikes said doing so would be considered trespassing.
Family members of Chase, including his wife, Jenny, said police told them he would be arraigned within 12 to 24 hours after the arrest.
The Inner Harbor is a hodgepodge of private and public places. For instance, McKeldin Square is a public site where anyone may protest, pass out pamphlets and exercise First Amendment rights. It was unclear Sunday evening whether the spot Chase chose is public or private.
The arrest comes two weeks after Chase temporarily won the right to paint on Ocean City's boardwalk. The 29-year-old who lives in Brooklyn Heights earns a living during the summer painting sci-fi landscapes in the beach town and collecting tips for his work.
He won a preliminary injunction from a federal judge after he sued Ocean City for violating the civil rights of street performers and artists by requiring permits and prohibiting them from selling their work in certain areas.
U.S. District Judge Ellen L. Hollander ruled this month that Ocean City could not enforce those restrictions if the goods sold are considered "expressive material." The order is to stay in place as long as litigation on the case continues.
Chase had planned to spend the weekend in Ocean City painting but returned home early because of rain.
He decided instead to set up at the Inner Harbor in front of the Harborplace shopping complex. Chase had laid out outdoor carpet, lined up cans of spray paint and set up his tip buckets when the video shows the two officers approached him and said he couldn't operate without a permit.
The video shows Chase explaining that he had won a court injunction in U.S. District Court and had a right to paint where he was. Officers argued the laws were different in Baltimore.
"It is my constitutional right to be here without prior approval," Chase said to the officer at one point.
"Your constitutional rights have nothing to do with the law," the officer said.
"If you don't have a permit, you're trespassing," the officer said at another point.
James Perry Cyphers, who is the boyfriend of Chase's sister, was with the artist when he was arrested and taped the incident. He said police told him to shut off the video camera before the arrest.
A police spokesman said details about the case were not yet available because the report was still being processed.
Cyphers said he received a warning citation for "contact with an officer."
Chase discovered spray-paint artistry a decade or so ago while on vacation in Cancun and taught himself to do it, according to a profile in The Sun. When he paints he cordons off a section of the beach and works to the rhythm of music he plays. Crowds often surround him as he paints. His works depict mountains, waterfalls and American flags.
He ignored Ocean City's laws before he ever filed his lawsuit, selling his paintings along the boardwalk before the ban.
"Mark is very adamant about his rights," said his mother, Deborah Chase.