The expulsion comes during a week of difficult relations between Britain and Saudi Arabia. The UK government issued a warning of new terror threats in the kingdom, and British Airways cancelled flights there.
"We have asked the Saudi Arabian Ambassador to withdraw a Saudi diplomat, and in response to the request a diplomat has been recalled to Saudi Arabia and is no longer accredited to the Saudi mission in London," a Foreign Office spokesman said on Friday.
He declined to comment further. London police also declined to give details of the case, which involves a current prosecution. But The Times newspaper named the diplomat as Ali al-Shamarani and described him as an "intelligence officer".
It said that over four years, Shamarani had allegedly paid several thousand pounds to a police officer for information about Middle Eastern citizens living in Britain.
This week's security alerts that have also strained relations between London and Riyadh were rejected by many Saudis, who said they were intended to pressure the kingdom into complying with a list of demands connected with the US-led “war against terror”.
These include controversial measures such as controlling Islamist charities, reining in the powerful clerical establishment and reforming an austere educational system accused of breeding hatred against the West, Jews and Israel.
"This is part of exerting pressure and they know the sensitivity of the kingdom when they talk about its security."
Saudi journalist Dawoud al-Shiryan
"This is part of exerting pressure and they know the sensitivity of the kingdom when they talk about its security," Saudi journalist Dawoud al-Shiryan told Reuters.
As the world's top oil supplier, Saudi Arabia is crucial to the world economy and the spate of bombings and violence has raised concerns over fuel supplies to the West.
The new warnings and British Airways' suspension of flights to Saudi Arabia came as a further shock after years of proud assertions by Saudi rulers that the kingdom was the safest place in the Middle East.
Speaking at a gathering of security, military men and citizens, Crown Prince Abd Allah urged Saudis to help security forces combat a "misguided, deviant group of terrorists".
Britain said it had intelligence on threats to its aviation interests in Saudi Arabia. Washington also issued a travel warning on Wednesday, saying it had credible information about threats to US and Western interests in the kingdom.