Michael Johnson, 24, was held by police after the incident involving his Mercedes CLS 350 at 3.50am on Thursday in Greater Manchester.
Local reports indicated the midfielder had been on his way to his girlfriend's home in Urmston when his car hit a parked BMW X5.
Johnson came through City's youth academy and made his first-team debut in 2006. He also represented England Under-19s.
But the midfielder has seen his career interrupted by injuries, including a ruptured cruciate ligament.
He regained full fitness in time for the 2010/11 season.
Johnson started last season on loan at Leicester before returning to City for the latter part of the campaign.
A spokesman for Greater Manchester Police said: "At approximately 3.50am (0250GMT) on May 31 2012, police were called to reports of a minor road traffic collision at Grangethorpe Road in Urmston.
"A 24-year-old man was arrested on suspicion of drink-driving."