Clive Williams, 69, was headmaster at Ashdown House Preparatory School in Forest Row, East Sussex for more than 25 years before he left in 2003.
He was questioned by Sussex Police about alleged sexual assault and child neglect offences against pupils.
Mr Williams was not charged and was bailed until 11 November.
Police said a 69-year-old man was arrested at an address in Barcombe, near Lewes, on Wednesday and a computer and documentation were seized.
The man was not named but BBC sources confirmed he was Clive Williams.
"During January this year we were contacted by a firm of solicitors representing a number of clients who have reported to them that they were sexually and physically assaulted by staff, whilst they were pupils at Ashdown House School near Forest Row in the 1970s," a police spokesman said.
"We have since been in contact with 20 people reporting offences against them, including those clients.
"Most have already been interviewed by officers from our specialist Child Protection Team in East Sussex.
"The investigation continues and now spans a period from the late 1960s to the early 1980s."
Sussex Police said there were no current safeguarding issues at the school.
Ashdown House has been owned by the Cothill Educational Trust since 2009.
The trust said in a statement in January, it understood that it may be the subject of legal proceedings relating to episodes of abuse, said to have taken place between 30 and 40 years ago.
"The trustees are deeply saddened about those matters and wish to do everything they can to assist any former pupil who has been affected," it said.

Wales international McCusker, 30, has impressed in the back row since a return from injury last month.
Eleventh-placed Irish face Northampton on Saturday, looking for a first Premiership away win in almost a year.
"We'll be keen to stay in touch with them as much as possible," McCusker told BBC Radio Berkshire.
Irish sit level on points with fellow strugglers Newcastle ahead of the trip to Franklin's Gardens and will be keen to maintain the momentum of their recent home form.
"We've had some games recently where we've been in it or just behind at half-time," said McCusker.
"But in the second half we've had games where we've just capitulated and been a totally different team.
"If we let Northampton get too far ahead, they'll be buoyed by that."
The former Scarlets captain left the Pro 12 club in September by mutual agreement as he joined Irish on an initial one-year deal.
Capped six times by his country, McCusker admitted the decision was driven by a need to play more games.
"I didn't really know how I'd ever leave," he said. "But circumstances changed and it wasn't the place I had fallen in love with.
"So it made the decision a lot easier. It was probably the right time and felt like the right thing to do."
The former headmaster of a prep school attended by London mayor Boris Johnson, has been arrested on suspicion of historic sex assaults.
[NEXT_CONCEPT]
London Irish number eight Rob McCusker believes confidence can flourish among his team-mates after their crucial Premiership victory against Worcester.