Timur Laut district police chief ACP Soffian Santong said the seven local men and two Indonesian women, aged between 20 and 38, were detained at 1 am.
Acting on a tip-off, police raided the entertainment outlet and found the suspects partying in one of the rooms, he added.
"Urine tests conducted on six of the male suspects were positive for various drugs, and they are being investigated under Section 15 (1)(a) of the Dangerous Drugs Act 1952," he said in a statement.
He said the owner, who was among those arrested, was also being investigated for operating a public entertainment outlet without a licence from the Penang Island City Council.
Soffian said the suspects were remanded under Section 6(1)(a) of the Entertainment and Places of Entertainment Enactment 1995 and Section 269 of the Penal Code.
They were also detained under Regulation 11 (1) of the Prevention and Control of Infectious Diseases (Measures within the Infected Local Areas) Regulations 2020.
Meanwhile, Seberang Perai Tengah district acting police chief Supt Mohd Mustafa Bidin said nine men including two Myanmar nationals were arrested for drinking liquor behind a convenience store in Taman Chai Leng at about 6.15 pm yesterday.
He said they defied police orders and the two foreigners did not have travel documents.
Police also nabbed three men and one woman for gambling in the compound of a house in Taman Chai Leng, he added.