Gere kissed Shetty five months ago during an AIDS awareness charity event in India, causing outrage from strict Hindus who claimed Shetty had violated the country's obscenity laws.
The Celebrity Big Brother star was reportedly stopped while she was travelling to Berlin today to attend this weekend's opening of musical Miss Bollywood.
A court issued an arrest warrant against Chicago actor Gere and prevented Shetty from leaving the country, but the immigration department had failed to see that it had been overturned by the Supreme Court, because it did not appear on its computer system.
Spokesman for the star, Dale Bhagwagar, said: "She called me in the middle of the night and was in tears."
Shetty said: "I can understand something like this if I'd committed a criminal offence. But what was my offence, when I'm just an actor, going to perform a musical on foreign land?"
Shetty has now been allowed to continue her journey and join her dance troupe after she had to undergo a series of questions.