New York police last night caught Oscar-winning actress Tatum O'Neal buying crack cocaine a few blocks from her flat on Upper East Side, it has been alleged.

O'Neal, who at ten years old became the youngest ever actor to win an Acadamy Award, was arrested at 7.30pm by detectives from Manhattan South Narcotics on Clinton Street between East Broadway and Grand Street, sources said.

"When the police approached, she asked them, 'You know who I am, right?'", a source reportedly told the New York Post. She went on to say she was doing "research" for an acting role.

Detectives found a pipe on O'Neal, who is the daughter of actor Ryan O'Neal and was once married to three-times Wimbledon champion John McEnroe. The pipe was clean.

Alan Garcia, the 33-year old suspected drug dealer involved, was also arrested. Both were taken to Precinct station house and were expected to spend the night in custody.

O'Neal, who wrote in her 2004 memoir A Paper life that drink and drug-taking was in her DNA, was charged with criminal possession of a controlled substance, while Garcia's charge was criminal sale of a controlled substance.

O'Neal's memoir described the childhood she spent with mother and actress Joanna Moore, who was an alcoholic and hooked on amphetamines while she was raising the child star.

"In the grip of addiction, [my mother] had virtually abandoned me and Griffin [her younger brother], leaving us in squalor - as well as beaten and abused by the men in her life," wrote O'Neal.

O'Neal herself then slipped into a life dominated by alcohol and drugs.

"I was thrust out there as a little kid. It was hard to cope," she told the New York Post last month. "I used to walk with my head down. I was involved with drugs and alcohol. I had a lot of shame and self-hatred." During the interview she also expressed sympathy for Britney Spears, who has endured a string of disastrous headlines in the last couple of years.

In 1996 O'Neal completed addiction rehabiltation and claimed to be clean.

Last year, she made an acting comeback with a part as alcoholic shrew Maggie, sister of Denis Leary's firefighter, Tommy Gavin, in US TV series Rescue Me.

When arrested last night, she reportedly asked police "Can't we just forget about this?"

"She's cool - it's the last thing I thought would happen," said a security official at her block of flats. "I'm shocked."