Thailand has laid the blame for Al-Araibi's arrest squarely at the feet of Australia, saying he was detained at its request.
But the Australian embassy in Bangkok has responded with a strongly-worded statement to "clear up confusion" about the matter.
"The red notice should never have been issued because of Mr Alaraibi’s status as a protected refugee. This was a breach of Interpol’s regulations," it said in a statement.
"The Australian Government was not initially aware of this, and in line with Interpol procedure notified Thailand of Mr Alaraibi’s travel."
The embassy said it would review its procedures to ensure a situation like Mr Al-Araibi's did not happen again.
Thailand says no stopping legal proceedings
Thailand's Foreign Affairs Ministry said it had not been previously aware of Al-Araibi's case and was not prejudiced against him.
"We would not have become involved in the issue had we not received the Red Notice alert from the Australian Interpol and the subsequent formal request by Bahrain for his arrest and extradition", the Foreign Ministry said in a statement on Wednesday.
"It took several days after the arrival of Mr Hakeem, before the Australian authorities informed us that the Red Notice had been cancelled. By that time, legal proceedings in Thailand regarding Mr Hakeem had already started and could not be reversed."
Thailand said previously that it was acting on an Interpol Red Notice request from Bahrain.
After being sentenced by Bahrain to 10 years' jail in absentia, Al-Araibi fled in 2014 and was later granted refugee status by Australia and lives in Melbourne.
He says he faces torture and possible death in Bahrain.
He was shackled on Monday when he appeared in court in Thailand where the formal hearings in his extradition trial were set down to start on April 22.
The Foreign Ministry's statement seems to contradict an earlier claim by Thai Immigration chief Police Lieutenant General Surachet Hakparn that Bahrain knew of Al-Araibi's travel plans prior to his arrival.
Surachet said on December 5 they had been instructed by Foreign Affairs to arrest al-Araibi prior to his arrival.
"The Bahraini government knew that he would be arriving in Thailand so they coordinated with Thailand's permanent secretary of foreign affairs to detain him, pending documents sent from Bahrain," Surachet told BBC Thai.
Australia has called for Thai Prime Minister Prayut Chan-o-cha to personally intervene and free the semi-professional footballer.
Earlier on Wednesday, Prime Minister Scott Morrison warned his Thai counterpart not to risk damaging the relationship between the two countries over Al-Araibi's detention.
"I would be very disappointed if as a result of how this was handled that that relationship between the Thai and Australian people were affected," he told reporters in Melbourne on Wednesday.