The group believes the trio are the first to be arrested under the powers of causing annoyance or inconvenience to World Youth Day pilgrims.

However, a police spokesman said the arrest was due to offensive behaviour, an offence that existed prior to the new laws.

The three women, wearing only underwear and some tape to cover their nipples, were protesting inside a cage outside the KFC restaurant on George Street, at the corner of Bathurst Street.

They had a banner that read: "Chicks agree, boycott KFC".

Police arrived and arrested the women - aged 20, 22 and 31 - and placed them inside a paddy wagon, Mr Baker said.

"One of the officers said: 'We have the new nuisance regulation this week for World Youth Day,'" PETA Asia-Pacific's director Jason Baker said.

"I said: 'Are you serious?' I thought it doesn't start until tomorrow, and was [being challenged in court] anyway."

However, a police spokesman said the women were arrested for protesting naked, "which is an offence".

"I don't think they were arrested under the new legislation, if that's what you are asking."

But Mr Baker said the group had conducted naked protests in the city before, and no members had been arrested.

"I'm shocked. We have protested many times in Sydney, and at this KFC before.

"We had 24 people naked in Pitt Street just six weeks ago ... we've never had problems."

Today's protest was a follow-up to the attention drawn last week by Pamela Anderson to KFC's treatment of chickens, Mr Baker said.

"The space an average KFC chicken has is about the size of an A4 piece of paper," he said.

"What we are asking KFC to do is implement minimum animal welfare standards."

The women have not been charged yet and are being questioned at a police station, the police spokesman said.

Failure to comply with the new WYD laws can attract a penalty of up to $5500.