A British woman who claimed she was gang-raped in Cyprus has been arrested on suspicion of making a false accusation as police released seven Israeli tourists from custody.

The 19-year-old woman had claimed that 12 Israeli teenagers raped her on July 17 at a hotel in the popular holiday resort of Ayia Napa.

The teenagers were remanded in custody the following day. Five were sent home hours before their second scheduled court hearing last Thursday after no evidence was found against them.

The other seven were released on Sunday after the woman reportedly changed her story after being shown video evidence by investigators.

The woman told investigators she initially filed a rape report after feeling "angry and insulted" that some of the Israelis had filmed her having sex with them, according to the state-run Cyprus News Agency.

“I went down from the room and met two of my friends. I told them what had happened and they immediately told me to file a complaint with police,” Israeli media outlet Channel 12 quoted her as saying.

The suspects told the outlet that the woman agreed to be filmed and "everything was consensual."

"She wanted sex," one of them said.

During a custody hearing last week, investigators told a court in the town of Paralimni that the woman was in a relationship with one of the seven suspects and had sexual contact with some of the other six over several days, according to Yiannis Habaris, a Cypriot lawyer representing two of the suspects.