Denis Donaldson, Sinn Fein's former legislative chief in the failed power-sharing government of Northern Ireland, admitted in December he had been on the payroll of the British secret service and the province's anti-terrorist police for the previous two decades.
He then went into hiding - because the traditional Irish Republican Army punishment for informing is death.
The IRA quickly denied responsibility. "The IRA had no involvement whatsoever in the death of Denis Donaldson," the outlawed group's one-line statement issued on Tuesday read.
Gerry Adams, leader of the IRA-linked Sinn Fein party, said he did not know who was responsible, but suggested it might have been the work of IRA dissidents opposed to Sinn Fein's diplomatic efforts.
"It is likely that his death at this time is intended to undermine current efforts to make political progress," Adams said. "Those who carried out this murder are clearly opposed to the peace process."
But Ian Paisley, whose Democratic Unionist Party represents most of Northern Ireland's British Protestant majority and refuses to co-operate with Sinn Fein, said someone within IRA ranks was the most likely culprit.
"There is a finger pointing tonight at IRA-Sinn Fein," he said.
"The IRA had no involvement whatsoever in the death of Denis Donaldson"
Irish Republican Army statement
The killing comes at a pivotal moment in Northern Ireland's 13-year-old peace process.
On Thursday, the prime ministers of Britain and Ireland, Tony Blair and Bertie Ahern, are to reveal a new blueprint for reviving a Protestant-Catholic administration that would be jointly led by the Democratic Unionists and Sinn Fein.
The plan would call for Northern Ireland's legislature to reconvene in mid-May and face a 24 November deadline to elect an administration.
Northern Ireland's previous power-sharing coalition fell apart in October 2002 because of an IRA spying scandal involving Donaldson.
The IRA itself declared last year it was renouncing violence for political purposes and backed the pledge by handing over its weapons stockpiles - moves supposed to spur a revival of power-sharing involving Sinn Fein.