Prosecutors say they are investigating the leader of Germany's Roman Catholic bishops on suspicion of aiding and abetting the sexual abuse of children.
Archbishop Robert Zollitsch of Freiburg is suspected of allowing the re-appointment of a priest accused of child abuse in 1987.
Archbishop Zollitsch was in charge of personnel in Freiburg at the time.
The archdiocese rejected the charge, accusing prosecutors and the media of "sensationalism".
In a statement, it said Archbishop Zollitsch had nothing to do with the case because he did not know about any allegations of abuse involving the priest.
It also said that the archbishop had not been responsible for the re-appointment, which was decided independently by the priest's religious order.
Prosecutors say the accusation is based on a single abuse complaint and investigations are at a very early stage.
"We did not check the accuracy of the claims," Prosecutor Wolfgang Maier said. "We only checked whether the claims are sufficient to justify an initial suspicion. We then started preliminary proceedings."
Mr Maier said details had been passed on to the authorities in Konstanz in southern Germany, which had already begun an investigation into the priest's activities.
Church officials said there had been at least one case of suspected sexual abuse at Birnau monastery in southern Germany in the 1960s, where the priest was working. They said they had only found out about the incident in 2006.
They added that they immediately reported it to the priest's religious order - the Cistercians - and the man involved had long since left the monastery.
The BBC's Tristana Moore in Berlin said the fact that the archbishop has been drawn into the abuse scandal is another blow to the image of Germany's Catholic Church.
Germany is one of a number of European countries where the Catholic Church has been hit by a wave of child abuse accusations.
Last week it emerged that more than 200 former students claimed they had been abused at Jesuit schools across Germany.
In May Pope Benedict accepted the resignation of the German Bishop Walter Mixa, after he was accused of beating children at an orphanage and sexually abusing a boy.
The Pope himself has been accused of being part of a culture of secrecy, and of not taking strong enough steps against paedophiles when he had that responsibility as a cardinal in Rome.
However, his supporters say he has been the most pro-active pope yet in confronting abuse.
The Catholic lay organisation We Are Church has said it is likely there are many other abuse victims who are yet to come forward.
In recent months, Archbishop Zollitsch, who heads the German Bishops' Conference, has apologised to victims of abuse, saying the Church had failed to help them.