Lamine Diack, the former head of world athletics, has been placed under formal investigation in France on suspicion of corruption and money laundering following a complaint from the World Anti-Doping Agency.
The inquiry, confirmed by the French financial prosecutor's office, comes at a time when the image of world sport's governing bodies is under serious scrutiny.
There is a large-scale corruption investigation at the International Federation of Association Football (FIFA) while athletics is fighting a public relations battle in the face of continual doping issues.
According to French news channel iTELE, the investigation is focused on suspicions that payments were made in return for not revealing the widespread doping of Russian athletes.
The prosecutor's office did not confirm that but said its investigation started when WADA alerted it to "acts of corruption and laundering involving members of the International Association of Athletics Federations."
The French financial prosecutor's office said Mr Diack, 82, and his advisor Habib Cisse were arrested on Sunday and released on Tuesday, after being "interrogated" and put under investigation.
The 82-year-old Diack, an ex-long jumper from Senegal, stood down in August after 16 years as president of the International Association of Athletics Federations (IAAF).
The IAAF's new president Sebastian Coe was questioned by French police on Tuesday, having offered to co-operate.
The IAAF has previously denied claims of widespread doping in the sport.
Speaking on the day of his election in August, the two-time Olympic 1,500-metres champion said suggestions his organisation were complicit in a doping scandal were "just inaccurate".
In its statement, the French financial prosecutor said: "Diack is suspected of receiving money in exchange for deferring sanctions for several Russian athletes who were found guilty of doping in 2011, ahead of the Olympic Games."
The prosecutor said it was also investigating whether other people were involved in suspected corruption.
The International Olympic Committee, of which Diack is an honorary member, said its ethics commission would also investigate the claims.
Police swoop on IAAF
Under French law, magistrates place a person under formal investigation when they believe there are indications of wrongdoing, but that does not always lead to a trial.
The Monaco-based IAAF confirmed a police swoop took place at its headquarters yesterday "to carry out interviews and access documentation". It said it was fully cooperating with the probe.
Diack's son, Papa Massata Diack, stepped down from his role as an IAAF marketing consultant last year during an investigation into allegations of doping in Russia.
The head of Russia's Athletics Federation, Valentin Balakhnichev, has also resigned from his role as IAAF treasurer. Dr Gabriel Dolle, the director of the IAAF medical and anti-doping department, also left the federation.
Russian sports Minister Vitaly Mutko told the TASS news agency that his country's athletics federation had cleaned up its act.
"We have already said that there were problems with our federation, but the old management are no longer working there," he said. "You have to understand that now there are a lot of criminal cases around the world, and it is not an easy situation to be in."
Lord Coe, who was at the organisation's Monaco headquarters at the time of the police raid and "volunteered himself to answer any questions", a source familiar with the investigation told Reuters.
Elected on a strong anti-doping platform, Lord Coe said this week in India: "It's not uniquely a track and field problem. Every sport in the world has global issues. We have them but we also resolve them."