A high-ranking Nazi officer, who helped develop a mobile gas chamber, became a spy for West Germany after World War Two and went on a training course for the BND intelligence agency despite German warrants for his arrest, BND archives showed.
"In hindsight, the recruitment of Walther Rauff is politically and morally incomprehensible," said BND historian Bodo Hechelhammer on Monday.
Rauff, who was a top SS security officer in Nazi Germany, was a BND agent in South America between 1958 and 1962, earning more than 70,000 Deutsche marks (about $US18,000), Hechelhammer said. Rauff died in Chile in 1984 having evaded attempts to bring him to justice.
The BND, formed after World War Two with the help of the United States, even sent money to pay for Rauff's legal fees when he fought extradition from Chile to face war crimes.
After the defeat of the Nazis in 1945 Rauff fled to South America, where he was recruited by the BND. He operated under the name of Enrico Gomez and was assigned to report on Fidel Castro, a mission that turned out to be futile because he was denied entry into Cuba.
Between 1960 and 1962, Rauff took part in two BND training courses in Germany - the second in February 1962 when there was a German arrest warrant for him.