Footage has emerged appearing to show a Notting Hill Carnival steward punching a reveller in the face while other festival-goers look on in shock.
The Met said an argument had escalated into a fight as police officers attempted to intervene shortly after 5pm on Sunday.
In a video of the incident, one of the men appears to be wearing a high-vis vest with the word "marshall" [sic] written on the back.
A spokeswoman for the Carnival denied the man had any connection to festival organisers and said he could have been employed by a third party.
Scotland Yard said a 17-year-old from Southwark, understood to be the apparent marshal, was arrested on suspicion of affray, racially aggravated threatening behaviour and assault on a police officer.
A 23-year-old from Westminster was also held on suspicion of affray, and both have been bailed until a date in September.
The footage, originally posted on the Quips, Tips and Road Trips YouTube channel, begins with the man in the high-vis jacket lifting himself off a collapsed metal fence, which appears to have been knocked down amid a scuffle.
Two police officers - a man and a woman - are then seen trying to separate the men before the "marshal" appears to aim a punch at his adversary, but gets pulled away by the male police officer.
Despite the efforts of others to hold him back, he then returns to land a blow on the man in a checked shirt before being dragged away by another man wearing a high-vis vest.
Three police officers are then seen clustered around the man who has been punched as one appears to handcuff him.
As they do so, a second man with the word "marshall" written on his high-vis jacket begins to lift up the collapsed fence.
The incident occured by the Brunel Estate in Westbourne Park Road.
Police said they were aware of the footage and were working to establish who the man in the marshal's vest worked for.
Notting Hill Carnival in pictures
The footage emerged as the Met revealed more than 400 people had been arrested during this year's festivities - the highest total in in a decade.
The Met reported a surge in violence and knife crime with 21 assaults of police officers leaving eight injured.
Some one million people were estimated to have turned out for the event despite the bad weather.
