1) Go to the singleplayer world list.
2) Click on any world.
3) Press Up or Down to move to a different world. Notice how it can't be done.
4) Press Tab.
5) Now the selection has shifted to the search bar.
6) Press Tab again.
7) Now the selection has shifted to the list of worlds.
8) Press Up or Down.
Now the world selection through arrow keys is working as expected. This behaviour is very weird and confusing, as this is not the case in Multiplayer server list, where just clicking on a server is enough to use arrow keys to browse servers.