Marcelo Rodriguez, who made the arrest at Will Rogers Park near the Beverly Hills Hotel in April 1998, believes that Mr Michael has profited from dragging his name through the mud, notably in the video for his song "Outside".
The video parodies Mr Michael's arrest and shows two uniformed police officers kissing intimately.
Mr Rodriguez's lawyer, Richard Thomas, said his client was "a very well- respected police officer who has had some very vicious things said about him".
In the court papers, Mr Rodriguez claims that the singer, listed as Georgios Kyriacos Panayiotou, hatefully aimed comments at him.
Mr Michael, who lives part-time at one of his homes in Los Angeles, pleaded no contest to a charge of lewd conduct one month after the incident. He was fined $810 and had to carry out 80 hours of community service.
He also underwent sex therapy, paid $100 to a victim restitution fund, was ordered not to enter Will Rogers Park and was put on 24 months' probation.
Mr Michael defused any further scandal by openly discussing his homosexuality in an interview on the CNN news television network.
The singer and his friends claim that he was set up in the incident, and that Mr Rodriguez was a good-looking man dressed in civilian clothes who had given every indication of being on the prowl for casual sex.
Mr Michael had no immediate comment to make on Mr Rodriguez's slander suit yesterday.