Wolffhechel and his wife were detained for two hours for visiting the area without authorisation and then sent back to Islamabad, The Telegraph quoted officials, as saying.
Karim Khan, District Police Officer for Abbottabad, said that the couple were taken into custody since they had not obtained prior permission to visit the town.
Their detention provoked a diplomatic protest from the Danish Foreign Ministry, which insisted that Wolffhechel had the correct paperwork to make the trip, the report said.
The area around bin Laden's compound in the Bilal Town district of Abbottabad has been tightly guarded since the then al Qaeda chief was shot dead in a US special forces raid on his lair on May 02.
According to the report, security sources said the Danish envoy had been travelling in his official car and followed by intelligence agents after visiting the nearby Thandyani resort.
He and his wife were stopped as they reached Bilal Town, where bin Laden is believed to have spent years hidden in a high-walled compound.
The couple were taken to Nawan Sher police station and questioned before being sent back to the capital.
The Danish Foreign Ministry complained about what it called a misunderstanding, the report said, adding that a spokesman for the ministry said the ambassador had been on an information gathering visit for the embassy, but declined to give further details.
Meanwhile, the Dawn reported that according to sources, the Federal Investigation Agency has been asked to investigate the Danish envoy’s visit to bin Laden’s former lair.