The two fans were taken into custody on Monday night after the bust-up at the luxury Earl's Regency Hotel in the central hill resort of Kandy where the New Zealand players were also staying, a local police official said.
"The team was in the hotel lobby when some British fans heckled them and it was turning into a nasty scene," the official who declined to be named told AFP. "That is when their bodyguards called the local police in."
He said charges were not pressed and the two men were freed early Tuesday.
An official who witnessed the brawl but asked not to be named said he saw one member of the security team assigned to protect the Black Caps come to blows with several England fans.
The incident came hours after New Zealand's defeat to the West Indies in the Super Eights match in nearby Pallekele. The holders England were then beaten by Sri Lanka at the same venue later that evening.
Sri Lanka Cricket sources confirmed that New Zealand players as well as some of their team officials were present when the brawl broke out.
Security at the tournament was beefed up after a Sri Lankan man trespassed into two rooms of Australian players on September 24 and offered them sex.
There was no comment from the New Zealanders, who are preparing to leave for home.