The 24-year-old singer suffered a suspected panic attack and was examined backstage.
Medics decided that Arthur didn't need to be taken to hospital and he instead returned to his hotel. Producers confirmed that doctors are keeping an eye on the singer - who delivered an emotional performance of Mary J Blige's hit 'No More Drama' - and have advised him to take it easy.
"James Arthur became unwell after his performance on the show last night," said a spokesperson for the show.
"An ambulance was called as a precaution but he was not taken to hospital and he will appear on tonight's show. The welfare of contestants is our key priority and we work with them to provide any support that is needed."
Arthur is said to be "in good spirits" after enjoying a "good night's sleep". He admitted that the amount of emotion he invested in his performance is likely to blame for the scare.
"I had an anxiety attack last night, maybe because I gave everything I had to my performance," he said.
"I feel loads better this morning after a good night's sleep and I'm looking forward to tonight's show - there's no way I am missing it."
The X Factor continues tonight at 8pm on ITV1.
Photo gallery - X Factor second live show:
Copyright: Ken McKay/Thames/Rex Features