Pope Benedict once unwittingly approved housing for a priest accused of child sex abuse, his former diocese has said.
The episode dates back to 1980 when he was archbishop of Germany's Munich and Freising diocese and known as Joseph Ratzinger.
However, a former deputy said he - not the future pope - made the decision to rehouse the priest, who later abused other children and was convicted.
Roman Catholic clergy have recently been linked to paedophilia scandals.
German Bishop Robert Zollitsch has apologised to victims of abuse. At a meeting with the German-born Pope on Friday he discussed accusations made in some 170 cases.
The Pope himself has defended celibacy among priests, saying it is a sign of "full devotion" to the Catholic Church.
'A bad mistake'
Following a report in the Munich-based newspaper Sueddeutsche Zeitung, the diocese of Munich and Freising confirmed that Archbishop Ratzinger had let the priest, known only as H, stay at a vicarage in Munich for "therapy".
H had been suspected of forcing an 11-year-old boy to perform a sex act upon him in the northern city of Essen.
While he was in Munich, between February 1980 and August 1982, no wrongdoing was reported.
He was then transferred to the town of Grafing, where he was relieved of his duties in 1985 after allegations of child sex abuse, the diocese said.
In 1986, he was given an 18-month suspended jail sentence and a fine for sexually abusing minors, details of which were not given by the diocese.
Archbishop Ratzinger's former deputy, Gerhard Gruber, stressed that the man who now heads the Catholic Church was not made aware of H's alleged abuse history.
"The repeated employment of H in priestly spiritual duties was a bad mistake," Gerhard Gruber said in a statement.
"I assume all responsibility."
Speaking to the Associated Press, he added: "You have to know that we had some 1,000 priests in the diocese at the time.
"The cardinal [Joseph Ratzinger] could not deal with everything, he had to rely on his vicar-general [deputy]."
Pope Benedict made his remarks about celibacy at a theological conference in the Vatican before meeting Bishop Zollitsch.
He defended "the value of sacred celibacy, which in the Latin Church is... required for ordination and is held in great regard by Eastern Churches".
Austrian Cardinal Christoph Schoenborn had called for an examination of priestly training, saying that the issue of celibacy needed to be looked at with "a great deal of honesty, both on the part of the Church and of society as a whole".
He later clarified his comments saying it would be wrong to say that celibacy was a prime cause of sexual abuse.
"If celibacy is the problem, then without celibacy there should be no sexual abuse but unfortunately this is not the case," he said.
"It has to be seen as a question of personal maturity, how someone relates to his personal development."