The DUP's David Simpson has claimed that Deputy Speaker of the Northern Ireland Assembly Francie Molloy had been working as an RUC informer for over 30 years.
Upper Bann MP David Simpson used Parliamentary privilege to make the allegation in the House of Commons.
Mr Simpson, MP for Upper Bann, said police believed Mr Molloy had a role in the murder of a former member of the RUC reserve in 1979 in Tyrone.
Mr Simpson claimed: "He was caught by the security forces in a compromising position. As a result of this he was recruited as an informer for the police."
Mr Simpson went on: "During the years that followed, Molloy passed on information to the police in Northern Ireland. This helped them to break open the IRA's notorious East Tyrone Brigade."
Mr Molloy challenged the MP to make his allegations outside the Commons.
"(David) Simpson follows in a long line of unionist MPs who have in the past abused parliamentary privilege to chase headlines regardless of the consequences," he said in a statement.
"Like his fellow unionist MPs, I have no doubt David Simpson, being a coward, will not repeat these allegations outside of Westminster." "Given this history I would expect all of us, the media included, to approach this latest stunt with extreme caution."
Mr Molloy added: "Unionist death squads in the past never stopped me going about my work representing Sinn Fein and the people who elect me. A unionist MP standing up in the British House of Commons will not succeed in this either. "
"I suspect that this stunt has more to do with leadership ripples and positioning going on within the DUP than anything else, and I for one don't intend to be commenting any further on this nonsense."
Northern Ireland Minister Paul Goggins said he could not comment on the detailed allegations Mr Simpson had made.