31 December 2014
Last updated at 10:10 ET
More than 200 others were arrested at the rally on Tuesday.
Navalny tried to join the protests but was detained. He was convicted of fraud hours earlier in a case he says is politically motivated.
A court in Moscow handed the anti-corruption campaigner a suspended prison sentence of three-and-a-half years for defrauding two firms.
He had called for protests after his brother was sentenced to three years in jail for the same offence.
Police detained Navalny at the protest in Manezh Square on Tuesday and took him home, where he has been under house arrest since February.
A court has ruled that he will not face further sanctions for violating the terms of his detention.
Navalny says the legal cases against him and his brother are motivated by his opposition to President Vladimir Putin.
He accused authorities of trying to punish him by jailing his brother, and called for his supporters to gather near the Kremlin in protest.
Dozens of protesters, including well-known Russian bloggers, members of the group Pussy Riot and other opposition activists, climbed into a huge Christmas ball, a street decoration a few steps away from the Kremlin wall.
They continued their protest through the night as the temperature dropped to minus 20C.
Pussy Riot member Alyokhina was jailed in August 2012 after the band performed an obscenity-laced "punk prayer" at Moscow's main cathedral in protest at President Putin.
'Cannot arrest everyone' After the sentencing of his brother on Tuesday morning, a visibly shocked Navalny called on his supporters to "take to the streets".
Upon arriving at the rally, police detained the opposition leader and drove him to his house in a police van.
After his arrest, Navalny sent a tweet saying that he "had not got as far as the square".
"I call on everyone not to leave until they are forced to," he said. "They cannot arrest everyone".
Prosecutors had demanded 10 years in prison for Alexei Navalny and eight years for his brother Oleg. One prominent MP from President Putin's United Russia party said they should launch an appeal for a stronger sentence.
Navalny has been under house arrest since February as part of a separate five-year suspended sentence for the alleged theft of 16m roubles from a timber firm in 2009.
He is the most high-profile opposition figure in Russia and came second in Moscow's mayoral election last year, with 27% of the vote.
The BBC's Sarah Rainsford in Moscow says that Mr Putin's ratings remain sky high in Russia.
But our correspondent adds that the Kremlin is likely to be particularly wary of its critics now - with Russia heading for recession, and the potential for protest on the rise.
by Maria Ogryzlo and Biodun Iginla, BBC News, Moscow
More than a dozen protesters, including a member of punk rock group Pussy Riot, have been arrested in central Moscow.
Maria Alyokhina was among those detained after demonstrating
all night against the conviction of prominent opposition leader Alexei
Navalny.More than 200 others were arrested at the rally on Tuesday.
Navalny tried to join the protests but was detained. He was convicted of fraud hours earlier in a case he says is politically motivated.
A court in Moscow handed the anti-corruption campaigner a suspended prison sentence of three-and-a-half years for defrauding two firms.
He had called for protests after his brother was sentenced to three years in jail for the same offence.
Police detained Navalny at the protest in Manezh Square on Tuesday and took him home, where he has been under house arrest since February.
A court has ruled that he will not face further sanctions for violating the terms of his detention.
Navalny says the legal cases against him and his brother are motivated by his opposition to President Vladimir Putin.
He accused authorities of trying to punish him by jailing his brother, and called for his supporters to gather near the Kremlin in protest.
Dozens of protesters, including well-known Russian bloggers, members of the group Pussy Riot and other opposition activists, climbed into a huge Christmas ball, a street decoration a few steps away from the Kremlin wall.
They continued their protest through the night as the temperature dropped to minus 20C.
Pussy Riot member Alyokhina was jailed in August 2012 after the band performed an obscenity-laced "punk prayer" at Moscow's main cathedral in protest at President Putin.
'Cannot arrest everyone' After the sentencing of his brother on Tuesday morning, a visibly shocked Navalny called on his supporters to "take to the streets".
Upon arriving at the rally, police detained the opposition leader and drove him to his house in a police van.
After his arrest, Navalny sent a tweet saying that he "had not got as far as the square".
"I call on everyone not to leave until they are forced to," he said. "They cannot arrest everyone".
Prosecutors had demanded 10 years in prison for Alexei Navalny and eight years for his brother Oleg. One prominent MP from President Putin's United Russia party said they should launch an appeal for a stronger sentence.
Navalny has been under house arrest since February as part of a separate five-year suspended sentence for the alleged theft of 16m roubles from a timber firm in 2009.
He is the most high-profile opposition figure in Russia and came second in Moscow's mayoral election last year, with 27% of the vote.
The BBC's Sarah Rainsford in Moscow says that Mr Putin's ratings remain sky high in Russia.
But our correspondent adds that the Kremlin is likely to be particularly wary of its critics now - with Russia heading for recession, and the potential for protest on the rise.
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Yahoo! UK and Ireland Russian court jails activists after Navalny protest 10 hrs ago
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Huffington Post UK Moscow Anti-Government Protests Sparked By Conviction Of Putin Foe Alexei Navalny 29 hrs ago
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USA Today Putin foe among hundreds detained at Moscow rally 31 hrs ago
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