Rebecca Blake, 29, and Conor McRedmond were arrested after an all-day drinking binge.
They were held for five days and accused of having sex outside marriage and being drunk in a public place – both criminal offences in the strict Islamic state.
Miss Blake, a recruitment consultant, met Irishman Mr McRedmond at The Irish Village, a hotel bar where patrons pay £10 a head for an all-you-can-drink brunch event. After drinking for 12 hours, the pair hailed a cab towards Dubai Marina.
Minutes later they were spotted in a passionate embrace by the driver in his rear view mirror, according to police reports.
Incensed by their behaviour, the driver stopped and complained to police in a patrol car parked nearby. When he returned with an officer, they saw Miss Blake having sex on the back seat of the cab with Mr McRedmond, it is alleged.
A source said: ‘They were completely drunk, started kissing and then got carried away. That’s when they started having sex.
‘When the police officer went over, he found the woman was completely naked and they were having sex on the back seat.’
Miss Blake works for global recruitment firm Manpower in Dubai. She is from Croydon, South London, and was educated at her local Catholic high school.
After their arrest the pair were taken to the nearby Jebel Ali police station and held in custody from May 4 to May 9. Police took DNA samples to provide evidence that they had had sex and had been drinking.
Officers are waiting for the results to come back from the forensic laboratory before they send the pair to court. They were released on bail only when two separate friends acted as guarantors and handed over their passports.
Miss Blake was bailed after a surety was paid by company manager Rowley Rees Brown, 42, a friend who lives in Dubai.
Yesterday she claimed she had not been arrested on suspicion of having sex and insisted she had been alone in the back of the cab.
In an interview, she is reported to have said: ‘I have no idea where these sex allegations have come from because none were put to me by the authorities. I was arrested for having a bottle of beer in the back of a cab, not having sex. That is all. I was alone in the vehicle.’
Mr McRedmond, who is thought to work for an engineering firm, also denies the charges. Those convicted of having sex outside marriage face a sentence of between one month and three years under Dubai law.
Consumption of alcohol is punishable by up to six months in jail and a fine of up to £340.
Foreigners jailed in Dubai are deported immediately after completing their sentences.
The case highlights the difficulties faced by more than 100,000 Britons who live in Dubai. Officials in the Gulf state have prosecuted several Britons for indecent behaviour over the past five years.
In 2008, Vince Acors, of Bromley, Kent, and Michelle Palmer, of Oakham, Rutland, were given three-month jail terms for having sex on Jumeirah Beach. They claimed they had simply been ‘kissing and cuddling’ and the sentences were suspended on appeal.
In 2010, estate agent Charlotte Adams and Ayman Najafi were jailed for one month by a Dubai court for kissing and fondling each other in a restaurant – a breach of strict decency laws.