A Muslim woman is suing Chicago police who mistakenly identified her as a potential "lone wolf" terrorist as she was leaving an underground station on July 4 wearing a headscarf, face veil and carrying a backpack.

Itemid Al-Matar says officers violated her civil rights by pulling off her religious clothing as they arrested her on the station stairs, then strip-searched her later at a police station, according to the federal lawsuit filed in Chicago on her behalf.

"Several (officers) ran up the stairs and grabbed the plaintiff and threw her down upon the stair landing, then pulling at her and ripping off her hijab (headscarf)," it says.

Security camera video made public shows several minutes of the arrest last year. Several officers can be seen pushing through a crowd on a stairway to reach Ms Al-Matar, but soon move out of view of the camera.

The fact that Ms Al-Matar was wearing a hijab, and the face veil, called a niqab, "was the impetus behind the actions" of the officers, the court filing said.

In a statement, Phil Robertson, a lawyer for the Chicago chapter of the Council on American-Islamic Relations (CAIR), and a co-counsel in the civil case, argued that "blatant xenophobia, Islamophobia, and racial profiling" underpinned the officers' actions.

A police report filed the night of the incident said officers had been "on high alert of terrorist activity" on the July 4 holiday when they spotted Ms Al-Matar exhibiting what they believed was "suspicious behaviour", including walking at "a brisk pace, in a determined manner".

It also says officers saw what they thought could be "incendiary devices" around her ankles and were also suspicious of her backpack, which was clutched to her chest.

"(Officers) believed that subject might be a lone wolf suicide bomber and decided to attempt to take subject into custody," it says.

A dog unit searched for explosive materials, the report says, "with negative results", while "the objects strapped around arrestee's ankles" turned out to be "ankle weights". But Ms Al-Matar was still charged, including with obstructing justice, after police accused her of resisting and refusing to comply with orders.

She was acquitted of all charges at a state trial earlier this year.

Thursday's lawsuit names six officers and the city of Chicago as defendants, accusing them of excessive force, false arrest, violation of freedom of religious expression and malicious prosecution.

A police spokesman declined to comment specifically on the suit,citing pending litigation. But police issued a brief written statement that says "officers work hard each day to investigate suspicious activity and fight crime and we strive to treat all individuals with the highest levels of dignity of respect".

The city's law department, which represents officers in civil litigation, declined to comment.

The case comes amid heightened scrutiny of city police. The release last year of a video showing a white officer fatally shooting black teenager Laquan McDonald 16 times sparked weeks of protests and led to a Department of Justice investigation of Chicago Police Department practices, which is continuing.