WASHINGTON, May 31 (Reuters) - Former Attorney General John Ashcroft cannot be held liable for the detention of an American Muslim after the Sept. 11 attacks in 2001, the Supreme Court said on Tuesday in a decision that granted him immunity.

The justices unanimously overturned a ruling that allowed Abdullah al-Kidd to proceed with his lawsuit against Ashcroft over his arrest, alleged mistreatment and 16-day detention under a U.S. material witness law.

Kidd, born in Kansas, attended the University of Idaho in the mid-1990s, when he converted to Islam. The FBI arrested him in 2003 at Washington's Dulles International Airport before his departure to Saudi Arabia for language and religious study.

He was held as a material witness in the Idaho case of Sami al-Hussayen, who had been charged with visa fraud and making false statements. Kidd, who had helped at an Islamic charity in Idaho with Hussayen, was never asked to testify in the case.

The high court agreed with the Obama administration that Ashcroft, who as President George W. Bush's first attorney general helped craft tough anti-terrorism policies adopted after the Sept. 11 attacks, had immunity from such lawsuits.

At issue was a law that allows material witnesses -- those who might have key information and be crucial to a case -- to be held even though they are not suspected of wrongdoing and not charged with a crime.

Civil liberties groups have said Kidd was one of about 70 men, almost all Muslims, arrested and held after the Sept. 11 attacks under the law that compels witnesses to testify before grand juries and at trials.

Attorneys from the American Civil Liberties Union, representing Kidd, argued that the law can only be used to secure testimony, not as a pretext to detain and investigate someone who ends up never being charged with a crime.

A federal judge and the 9th Circuit court of appeals ruled the lawsuit against Ashcroft could go forward, but the Supreme Court disagreed.

Justice Antonin Scalia said for the court that Ashcroft did not violate clearly established law and thus is entitled to immunity. Ashcroft did not violate Kidd's constitutional rights, Scalia said.

Immunity protects all government officials except those who are plainly incompetent or knowingly break the law, Scalia said, adding, "Ashcroft deserves neither label."

Lee Gelernt of the ACLU said of the ruling, "The court has unfortunately let Attorney General Ashcroft off the hook."

The ruling only addressed whether Ashcroft can be held liable, not broader questions about whether use of the material witness statute was lawful.

Gelernt said four justices raised serious questions about using the material witness law to justify preventive detention in the future.

It marked the second time the Supreme Court has addressed a civil lawsuit against Ashcroft for policies after Sept. 11.

In 2009, the court ruled that Ashcroft and FBI Director Robert Mueller could not be held liable by a Pakistani man who said he had been abused while imprisoned for more than a year in New York after the Sept. 11 attacks.

The Supreme Court case is John Ashcroft v. Abdullah al-Kidd, No. 10-98.

For Ashcroft: Acting Solicitor General Neal Kumar Katyal.

For al-Kidd: Lee Gelernt of the ACLU.

(Reporting by James Vicini)