Photos and videos of the group drinking beer from their shoes while wearing underwear emblazoned with the Malaysian flag at Sunday's race drew an outcry on social media, with many calling it a sign of disrespect.
The group were celebrating after Australian Daniel Ricciardo claimed his maiden Formula One win of the season.
They are being held in remand for four days pending investigations for public indecency and provocation, state news agency Bernama had reported, quoting local police.
"Police will investigate, we choose which law is appropriate then we recommend to the A-G (Attorney-General) to charge them under those acts," Malaysia's deputy home minister Nur Jazlan Mohamed told reporters at an event in Putrajaya, the country's administrative capital.
Nur Jazlan said tourists to the Muslim-majority country should respect its open attitude towards visitors and respond in kind.
"We open our doors to tourists. We try to treat them as well as or sometimes even better than our own people. But when they come here with the intention to commit indecent acts to embarrass us, I think that's not how visitors should respond to our good treatment, especially if there is a political motive behind it," the minister said.
According to race organizers, nearly 50,000 people, mostly tourists, attended the Formula One race in Sepang, on the outskirts of Kuala Lumpur.
In June 2015, four Western tourists were fined and deported from Malaysia after posing naked on the peak of Mount Kinabalu in Sabah, angering locals who consider the mountain sacred.
