The singer, 45, was cautioned and has not been charged.
A Scotland Yard press spokesman says, "A 45-year-old man male was arrested on Sept. 19 in the Hampstead Heath area on suspicion of the possession of drugs."
While the statement did not name Michael, other sources confirmed his identity, CNN reports.
The spokesman added, "He was taken to a north London police station where he was interviewed and received a caution for possession of Class A and Class C drugs."
While the spokesman also would not identify the type of drugs, reports have said that they included crack cocaine, which is termed a Class A drug in the U.K.
Arrest in Public RestroomThe reports say that Michael, who lives nearby with his long-term partner Kenny Goss, was arrested at an underground public men's room.
In a statement released by his rep on Sunday, Michael said: "I want to apologize to my fans for screwing up again, and to promise them I'll sort myself out. And to say sorry to everybody else, just for boring them."
This is the latest brush with the law for the singer, whose most notorious arrest was for lewd behavior in Beverly Hills in April 1998.
Two years ago, he was arrested and cautioned for drug possession after being found he was unfit to drive. That followed an incident six months earlier when he was arrested on suspicion of having drugs when he was found slumped at the wheel of his car in London's Hyde Park.
Michael, whose 1987 album Faith spent 12 weeks at No. 1 in the U.S., has just completed what he has called his final world arena tour.