The anonymous witness said he was a teenager in al-Dujail in 1982 when an attempt on Saddam's life led to what the prosecution has termed a massive crackdown on the village, which included hundreds of arrests and the execution of 148 men.
"The prosecutor said they were executed, but I am telling you I ate with them some time ago," the witness, who had worked at Baghdad's Abu Ghraib prison in the mid-1980s, said.
He said 23 of them were alive.
"Many of them have become rich and occupy powerful positions," he said.
As he testified from behind a curtain he wrote down names for the judge.
The lawyer representing Awad al-Bandar said: "If it is true and these people are still alive, this whole case should be reconsidered from the beginning."
It was al-Bandar's revolutionary court that sentenced the men to death in 1984.
Saddam and seven co-defendants are on trial for crimes against humanity stemming from the alleged arrests, torture and execution of al-Dujail villagers as well as the destruction of their property.
The witness also accused Jaafar al-Musawi, the chief prosecutor, of coming to al-Dujail in July 2004 and offering to forge documents.
"Someone came and asked for witnesses, saying the Iranians would thank them and if they don't have the necessary documents, he could forge them," he said.
"This man was prosecutor al-Musawi."
He said that many al-Dujail villagers who went on to testify against Saddam were at that meeting. The prosecutor denied the allegations.
"I just want to clarify this for the records. I was born in Baghdad and I never went to al-Dujail. On July 8, 2004, I wasn't a prosecutor, I had nothing to do with the court," said al-Musawi.
One of the defence lawyers, meanwhile, said a defence witness who testified recently had been killed, a claim that could not be confirmed.
Throughout the trial, the defence has complained that witnesses for the prosecution have been coached and induced to testify.