Police said they were negotiating with the protesters staging the "sit down" protest outside the Buxton Road police station.
It comes after a young Sikh woman, who has not been identified, was reportedly beaten and sexually assaulted in the Bedfordshire town by a "Muslim man".
On Wednesday night, Bedfordshire Police confirmed they were "in talks" with the protesters to try and "resolve the situation" amid fears of rising tensions.
Reports suggested that more than 300 locals were involved in the protest because of "lack of action" from police over Monday's attack.
There were reports that members of the English Defence League were also among the crowd.
Locals reported that the "community … feels the police could do more with regards to the investigation and current situation".
Concerns were also raised that police were set to release the accused sex attacker amid fears it fuel rising tensions.
Detectives have arrested a man, who has not been identified, in connection with the attack.
On Tuesday night a Bedfordshire police spokesman said: "Police in Luton are currently in talks with members of the Sikh community who are holding a sit down protest outside the Buxton Road police station this evening (Tues May 29).
"Their concerns follow a report that a young woman from their community was sexually assaulted yesterday (Mon May 28).
"The allegation is currently subject of an investigation and all parties involved are being spoken with to establish the facts."
She added: "One man has been arrested in connection with the allegation and enquiries continue.
"Police are working to resolve the situation this evening with the community leaders."
Police declined to comment further or disclose the nationality of the arrested man.
