The alleged assault took place in the city centre at around 1.30am, when two young women were approached by a man in McDonald’s on Blake Street.
He followed them to a bench outside the entrance to Museum Gardens and allegedly sexually assaulted one of them near to the river path, close to the steps at Dame Judy Dench walk.
A 32-year-old man is in custody, and police are now trying to trace two men who may have crucial information.
The first man is white, aged around 18-years-old, with short, brown, curly hair. He was wearing a blue and yellow Nirvana t-shirt and blue jeans.
The second man is white, of slim build and a similar age, with short, brown, straight hair. He wore a white top with blue, long-sleeved arms and jeans.
Both men were seen walking across Lendal Bridge in the direction of York Minster at around 1.15am, and were approached by a young female seeking their help.
Anyone with information can call North Yorkshire Police on 101.