Former Garsen MP Danson Mungatana and his co-accused Collins Waweru were on Wednesday granted Sh20,000 bail pending investigations into suspected fraud.
They are expected to appear in court on Tuesday next week.
The two were arrested on Tuesday by detectives from Kilimani police station in Nairobi.
Mungatana was arrested alongside Waweru - whom he said was his client - at a city hotel for what police are saying was obtaining money by false pretences.
Police reports indicate that the former legislator had been implicated in a scheme to defraud a woman under the guise of facilitating her being awarded a tender.
Nairobi police boss Rashid Yakub told journalists the woman reported to the Military Police at the Department of Defence with tender documents that turned out to be fake.
The woman claimed a person who had identified himself as a senior military officer at DoD had given her the documents and said he was in a position to help her win a Sh70 million cereals supply and building tender.
"The said person requested he be given a down payment of Sh1 million, which was handed to him in July 14, 2020," Yakub said.
He said the woman was instructed to meet her client who was pushing for the tender at a city hotel.
"In the company of two other women, she went to the hotel and found a man identified as Collins Waweru together with Mungatana who was introduced as the senior person pushing for the tenders at DOD," the police boss said.
Mungatana and his co-accused are alleged to have requested for another Sh1 million to facilitate the deal.
Yakub said it is at at that point the women got suspicious and informed the police.