The Olympic Council of Ireland (OCI) confirmed it is probing reports that a competitor at London 2012 previously bet on an opponent to win an event in which they were both competing.
A spokesman said the athlete, who was not named, has been told about the anonymous allegation.
The claim has rocked the Olympic squad of 65 athletes across 14 sports.
The OCI spokesman said it is now a legal issue between the OCI and the competitor and that it would not make any further comment.
Olympic organisers are not involved at this stage.
The allegation, made on email, accused the competitor of placing two bets on an opponent in an unspecified sport prior to the Olympics.
The Irish Independent newspaper said it has possession of detailed documentary evidence which suggests the competitor used their personal account with a large bookmaking firm to place two separate bets, both backing a specific opponent to claim victory in a competition they were also in.
The bets, at a price of 12/1, were placed the day before the competition started and both were successful, according to the daily newspaper.
Records show the first bet won 533 euro (£417) and the second one 3,367 euro (£2,634), it added.
It is understood a detailed letter from the competitor's solicitor was sent to the OCI on Thursday and a full investigation was launched.
The probe is the latest twist to affect Team Ireland in recent weeks.
The OCI was caught in a legal wrangle in the run-up to the Games over the make-up of the women's 400m relay team.
Elsewhere two Irish athletes took cases for non-selection to the Court of Arbitration for Sport.
Boxer Joe Ward's appeal was rejected on Thursday and the fate of showjumper Denis Lynch will be known tonight.
The International Olympic Committee confirmed they were investigating the allegation.
IOC communications director Mark Adams said: "The allegation is that an Irish athlete has been betting against themselves in an event in which he or she was involved prior to the Olympics.
"It was reported to us last night and we have a process of dealing with betting.
"We need to find out what the full facts are and we are looking into it but as far as I understand it doesn't affect anything to do with the Games itself and is entirely separate."