Brazil's former president Luiz Inacio Lula da Silva was briefly detained as part of a corruption investigation on Friday, setting off a political crisis in the country.

The new 'evidence' in the corruption probe against Lula brings the ongoing Petrobras investigation closer to President Dilma Roussef.

Brazil's state-owned oil company Petrobras has been the focus of an investigation into a vast corruption scheme.

Police arrested Lula, who catapulted the left-leaning Workers Party into power 13 years ago, at his home on the outskirts of Sao Paulo and questioned him for three hours, Reuters reported.

The investigators say Lula revived kickbacks from real estate deals at the oil monopoly.

"Ex-president Lula, besides being party leader, was the one ultimately responsible for the decision on who would be the directors at Petrobras and was one of the main beneficiaries of these crimes," a police statement issued after his detention said.

"There is evidence that the crimes enriched him and financed electoral campaigns and the treasury of his political group."

Rousseff, who is facing impeachment following allegations of budget irregularities, said the arrest of Lula was "unnecessary".

She pointed out that the former president had given his voluntary testimony in the case.

Lula, who rose from humble roots to become one of the most powerful and popular politicians in Brazil's history, denied any wrongdoing and slammed the investigators for "disrespecting democracy".