The suspect, aged 22, was arrested after a serious two-car crash involving the Audi he was driving on Broadway on Sunday evening.
The man was detained on suspicion of causing death by dangerous driving after a 32-year-old woman died at the scene.
West Midlands Police has now confirmed the suspect has been released under investigation while enquiries continue.
The woman who died was driving a red Vauxhall Corsa when it was involved in a collision with an Audi S3 near the University of Wolverhampton's Walsall campus at around 7.20pm.
Firefighters had to fold back the roof of the Corsa before the woman could be freed after the car ended up on its side between a hedge and a tree.
Meanwhile the roof of the mangled Audi had to be cut off to free one of two male passengers who were injured in the crash.
They were both taken to hospital, with one of the men said to be in a serious condition. The Audi driver was unharmed and was taken into custody.
Broadway was cordoned off for several hours near Magdalene Road while specialist collision investigators began their investigation.
Flowers have since been left at the scene, where residents told the Express & Star that the area is a hotspot for crashes with several damaged railings evidence of previous smashes.
West Midlands Police is appealing for anyone with information or who has dash-cam footage showing the Audi S3 in the build-up to the crash to come forward.
A spokesman for the force said: "Please call us on 101 or message on Live Chat via our website and quote log 3242 from Nov 21."