'Southern Hospitality' Star Grace Lilly Arrested With 'Happy Pills' in Purse, Cops Say

"Southern Hospitality" star Grace Lilly was arrested Monday ... after cops pulled her over and say they found a bottle of "happy pills" in her purse late Sunday night.

According to a police report, obtained by TMZ, Grace was driving through Charleston, South Carolina, in her Mercedes C-Class sedan with a man in her car. Officers say they initiated a traffic stop when Grace failed to use her turn signal to change lanes.

Cops say there was already a warrant out for her arrest in the system, so officers ordered her to step out of the vehicle and they detained her in handcuffs.

While detained, Grace allegedly asked if she could bring her purse with her to the detention center ... and cops say they found a container of pills inside the bag labeled "Happy Pills."

Police say they found "12 circular white pills with a 'P' imprint on one side, and half of an oblong blue pill with no identifiable imprints."

When asked about them, cops say Grace told them the blue pill was Xanax and the white pills were birth control.

According to the police report, Grace said she had a prescription for the Xanax but did not have any proof at the time.

After booking Grace in the Al Cannon Detention Center, police say the pills were put into evidence to be tested for a possible drug violation.