The former Kettering Town boss was detained after Northumbria Police were called last night to a hotel in Gateshead.
A Northumbria Police spokesman said: "Police attended the Hilton Hotel in Gateshead yesterday evening after we received a report of concern for a 40-year-old man staying at the hotel."
"The man was detained under the Mental Health Act and no-one was injured during the incident."
Gascoigne is understood to have moved to the Hilton Hotel after leaving the Malmaison in the early hours of Wednesday.
A Hilton spokesman said: "We can confirm that the guest in question checked into the hotel early on Wednesday, February 20.
"While there was no disturbance caused (at the Hilton), we did receive a phone call from the police later that day.
"Since then we can confirm that he was escorted calmly from the hotel and we are continuing to co-operate with the police."
Gascoigne has had a troubled history of emotional instability and erratic behaviour.
Once regarded as one of the world's best footballers, Gascoigne's playing career was plagued by personal problems, many linked to his heavy drinking.
He has has been treated on a number of occasions for drink and mental health problems.
In 2005, he was hospitalised with pneumonia, sparking fears over his long-term health, and last year he underwent emergency surgery for a perforated stomach ulcer.
He has also had several run-ins with the police over the years.
His tenure at Kettering lasted just 39 days, and he was dismissed in December 2005, along with assistant manager Paul Davis.
Club owner Imraan Ladak claimed the former England midfielder was "under the influence of alcohol before, during and after several first-team games and training sessions".
More details on Gazza's chequered career