Tammy Davis-Charles, a nurse and fertility specialist from Melbourne, was arrested at a rented house in Phnom Penh on Friday in a raid following an order made in October banning surrogacy in Cambodia.
This follows bans on Australians using surrogacy services in India, Nepal and Thailand.
The arrest of Tammy Davis-Charles came after a raid led by the chief of Cambodia's Anti-trafficking Office, Police Colonel Keo Thea.
A leading Cambodian IVF doctor was also arrested soon after Cambodia announced the ban on all forms of surrogacy, calling the programs a form of human trading.
Ms Davis-Charles has had her own experience with surrogacy - she and her partner are now raising twin boys born through the use of an egg donor and surrogate in Thailand before that country outlawed the practice.
Their experience was documented in 2014 by Channel 7's Sunday Night program.
"Not only has she given us the most precious thing she could ever give us, we've helped her and her family set up for the rest of their life as well. So it's a win-win situation."
It's alleged Ms Davis-Charles had arranged for more than 20 Cambodian women to carry babies through her Fertility Solutions PGD Clinic, with five or six children reportedly born in Cambodia through surrogacy arrangements.
There are up to 50 surrogate agencies operating in Cambodia, which has seen a sharp rise in demand for services after countries such as Thailand, India and Nepal introduced bans on surrogacy for foreigners.
Commercial surrogacy, where the surrogate is paid more than her medical costs is currently banned in most Australian states.
A Senate inquiry reported earlier this year that many Australians are pursuing offshore commercial surrogacy arrangements because of the difficulties of negotiating altruistic arrangements in Australia.
Professor Anita Stuhmcke is with the law faculty at the University of Technology in Sydney.
"Within Australia altruistic surrogacy is quite an expensive practice to undertake. You would not think that from the terminology used. But in relation to the commercial surrogacy that people are seeking overseas, the approach that was being used in the past is an American model where people are contacting an agency, the agency will locate a surrogate for them, they will have the child through that agency in that overseas jurisdiction and then bring the child back to Australia with them. And the main reason for doing that is that there are prohibitions against that form of commercial styles of payment in Australia."
Altruistic surrogacy remains expensive in Australia due to third party medical and legal costs prompting many to travel overseas.
Sam Everingham is the director of the Australian non-profit organisation Families Through Surrogacy.
He says the United States and Canada offer best practice when it comes to commercial surrogacy, but costs of around US $200,000 put those countries beyond the reach of most Australians.
Many turn to surrogates in developing countries.
Mr Everingham says a number of Australians will be affected by the ban in Cambodia.
"Our estimate is we've got at least 400 babies in utero in Cambodia now for foreigners, and many of those babies will be for Australian couples. Some of those couples have paid lot of money out and don't yet know whether their surrogate is pregnant, so it's a really stressful time for Australians who feel like the system at home has failed them, because surrogacy is so hard to access domestically, and they feel like they've been forced to go offshore."
In response to growing concerns about exploitation of surrogate mothers and children, a federal Parliamentary Committee earlier this year recommended new national laws to harmonise existing State and Territory surrogacy legislation.
Attorney-General George Brandis has not yet responded to the recommendation.
