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Earlier in November, video went viral on social media capturing the moment the woman, named by BBC Persian as Ahoo Daryaei, undressed on a university campus before being forcibly detained.
A spokesperson for the Iranian judiciary said the woman had been treated in hospital and returned to her family.
Her arrest drew international condemnation, with Amnesty International among those calling for her immediate and unconditional release.
"Considering that she was sent to the hospital, and it was found that she was ill, she was handed over to her family... and no judicial case has been filed against her," judiciary spokesman Asghar Jahangir said.
A student movement organisation first published the video of the arrest, reporting that Ms Daryaei had an altercation with security agents over not wearing a headscarf, leading to her undressing during the scuffle.
Iranian authorities at the time said Ms Daryaei was "sick" and had been taken to a psychiatric ward.
It is not the first time Iranian authorities have branded a woman protesting compulsory hijab laws with a mental illness.
Following Ms Daryaei's arrest, Iranian activists on social media condemned what they said was a pattern of diagnosing women's right activists.
One woman, who fled Iran for Canada in 2018, told BBC Persian that her family had been pressured by the Iranian regime to declare her mentally ill.
“My family didn’t do it, but many families under pressure do, thinking it’s the best way to protect their loved ones. This is how the Islamic Republic tries to discredit women, by questioning their mental health,” Azam Jangravi, who fled after being sentenced to three years in prison for removing her headscarf during a protest, said.
Covering the neck and head and dressing modestly became mandatory for women in Iran following the 1979 Islamic Revolution.
Two years ago, Kurdish woman, Mahsa Amini, died in police custody after being detained for not wearing hijab “properly”.
More than 500 people were reportedly killed during months of nationwide protests that erupted in the aftermath of her death.
