The investigation by The Wall Street Journal was based on interviews with current and former British officials and close friends of the Mandarin-speaking, heavy-smoking Briton, the Journal reported Tuesday.
The Journal said it learned that Heywood, 41, was providing Britain's secret intelligence service MI6 with information about the family of Communist Party leader Bo Xilai for more than a year before Heywood was killed and Bo was ousted.
China regards the private lives of its leaders as state secrets. Information about them and their families is prized by foreign governments trying to understand the inner workings of China's political system.
Bo's wife was convicted in August of poisoning Heywood in his hotel room in the southwestern city of Chongqing where Bo held the post of party chief.
British authorities immediately sought to quell speculation that Heywood was a spy.
Foreign Secretary William Hague, who oversees MI6, broke with standard policy of not commenting on intelligence matters and issued a statement saying Heywood "was not an employee of the British government in any capacity."
Neither Chinese nor British officials have suggested Heywood was killed because of his MI6 link.
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