Mossad used Peter Sichrovsky, one of Haidar's closest aides, to gather information on his contacts with Arab dictators. Sichrovsky said he had been a Mossad informant for five years until retiring from politics in 2002.
"I wanted to help Israel and certainly did not do anything wrong," said Sichrovsky, who was secretary-general of Haider's Freedom Party and a member of the European Parliament.
The Austrian state prosecutor said Wednesday he would open an investigation to determine whether Sichrovsky should be prosecuted. Spying for a foreign power carries in Austria a jail sentence of up to three years.
The revelations, in the news weekly Profil, stunned the Austrian political class. The Jewish community had regarded Sichrovsky as a traitor, while anti-Semitic Freedom Party activists made no secret of their distrust.
The Freedom Party became a member of Austria's governing coalition in 1999, prompting a diplomatic boycott by the European Union. Haider had publicly praised the SS and Hitler's employment policies. Israel withdrew its ambassador.