The case, involving the chief steward of a Paris-bound flight, is the latest setback for the struggling national carrier, which was struck by twin tragedies this year when one of its passenger jets went missing and another was shot down over conflict-torn east Ukraine.
The airline said in a statement Thursday that French police had detained a crew member for questioning following allegations by a passenger of "inappropriate sexual behaviour" on flight MH20 from Kuala Lumpur on August 4.
The Australian passenger complained to authorities about the incident after touchdown at Paris' Charles de Gaulle airport, saying she had told crew at the beginning of the flight about her apprehension of flying with the airline in the wake of the two disasters.
The steward sat beside her and sexually assaulted her under the pretext of "comforting" her, she said, according to a source close to the French probe.
Malaysia Airlines vowed to assist French authorities in their investigation, adding "the safety, comfort and well-being of our passengers is always our highest priority".
"Malaysia Airlines expects and accepts nothing short of the highest standards of conduct from its crew and takes any such allegations very seriously," it said.
Malaysia Airlines Flight MH370 disappeared mysteriously in March with 239 people aboard, en route from Kuala Lumpur to Beijing. No trace has been found and the airline was widely criticised for its handling of the crisis.
On July 17, MH17 was shot down over Ukraine, with 298 people killed.
The airline stands on the financial brink after the disasters.
State investment fund Khazanah Nasional, which has controlled the airline for years via a 70 percent ownership stake, said last week that it plans to buy all remaining shares and de-list the company before undertaking a "complete overhaul".