Two Italian parliamentarians are being investigated by the Swiss authorities on suspicion of spying for a foreign government.
The pair were arrested in canton Ticino on Thursday as they attempted to recover documents linked to a corruption case in Italy.
One of the men, Enrico Nan, is a member of Prime Minister Silvio Berlusconi's ruling right-wing Forza Italia party.
Two Italian police officers and a former magistrate were also arrested but were released - along with the two parliamentarians - after being held for several hours.
A sixth man, Rome-based financial consultant Igor Marini, remains in custody on suspicion of money laundering.
Marini is a key witness in an Italian parliamentary investigation into an alleged corruption scandal involving millions of dollars in kickbacks.
The money was reportedly paid out by Telecom Italia during the purchase of a 29 percent stake in the Yugoslav company Telekom Serbia.
Telecom Italia bought the stake for $497 million (SFr654 million) in 1997. At the time, the Italian treasury owned Telecom Italia through a holding company.
In February 2001, prosecutors in the northern Italian city of Turin launched an investigation into the deal after "La Repubblica" newspaper alleged that Italian officials demanded millions of dollars in kickbacks as part of the purchase.
The newspaper did not say who received the money.
Late last year, Telecom Italia agreed to sell the stake back to the Serbian government for €195 million (SFr294 million), less than half the amount it paid to buy the stake.
On Wednesday Marini spoke to the parliamentary commission investigating the matter in Rome and demanded to be taken to canton Ticino to prove his claims that former senior government officials had accepted kickbacks.
The financial consultant allegedly told the commission he had laundered $55 million through a now-deceased Lugano lawyer.
Part of the money was then transferred to private accounts in San Marino and Britain belonging to members of the Italian government, headed at the time by Romano Prodi, the current head of the European Commission.
The two parliamentarians were arrested after they tried to get their hands on documents that could confirm Marini's allegations at the Lugano receiver's office.
The arrest, which comes just a few days before an official visit to Switzerland by the Italian president, Carlo Azeglio Ciampi, is threatening to blow up into a diplomatic incident.
The Italian media have complained about the lack of cooperation from the Swiss authorities. The Swiss said they received no prior notification from the Italians of the investigation.
Folco Galli, spokesman for the justice ministry, said he was "astonished" by the Italians' behaviour.
Switzerland has already provided judicial assistance to Italy relating to the Telecom Italia case on two occasions, while a third request is still pending.
Fulvio Pelli, an influential Radical parliamentarian from canton Ticino, told swissinfo there was no reason for a diplomatic flap
"The Italian authorities would have also been angry if I had proceeded in the same fashion to recover documents," he said.
Pelli added that he didn't expect the affair to sour relations between Switzerland and Italy.
But Nan criticised the actions of the Swiss authorities, claiming the visit had been widely reported in the media. He described the spying accusation as "offensive and ridiculous."
"This diplomatic incident could have been avoided. The Swiss judicial authority could have made checks without resorting to withholding passports," he said.
swissinfo with agencies
A diplomatic row has broken out between Switzerland and Italy after two Italian parliamentarians were arrested in canton Ticino.
The two men had travelled across the border to Lugano in search of documents relating to a corruption inquiry in their own country.
The probe relates to $55 million in kickbacks allegedly paid to former Italian government officials.
The Swiss justice ministry said it was "astonished" by the behaviour of the Italian parliamentarians.