Pope Benedict XVI has for the first time been drawn into the Catholic sex abuse scandal in his home country of Germany.

His former archdiocese of Munich has acknowledged that, while he was in charge, it dealt with a suspected paedophile priest by transferring him to a different parish where he went on to commit sex offences against children. The revelation has drawn attention to Benedict's handling of abuse claims, both when archbishop and later as a prefect of the Vatican office dealing with such crimes, a position he held until becoming pope in 2005.

Yesterday, the head of the German Catholic bishop's conference, Archbishop Robert Zollitsch, revealed he was investigating more than 170 allegations of abuse in the church's institutions. The scandal broke in January when it was alleged that, over a period of 30 years, priests found to be abusing children had been redeployed to other parishes rather than dismissed.

Zollitsch reported that Benedict had expressed "great dismay and deep shock" when briefed, but had encouraged the bishops to continue searching for the truth. Hours later however, the Munich archdiocese admitted it had allowed a priest suspected of having abused a child to return to pastoral work in the 1980s, while Benedict, then Cardinal Joseph Ratzinger, was archbishop.

The archdiocese said the chaplain, identified only as H, was given therapy for suspected "sexual relations with boys" but then moved to nearby Grafing. He was suspended in 1985 following fresh accusations, and convicted of sexually abusing minors the following year.

Last night, a Vatican spokesman stated that it was the Munich vicar-general who had approved the transfer and he took "full responsibility", while the Munich archdiocese said Benedict did not know about the transfer. However, an American charity expressed disbelief. "We find it extraordinarily hard to believe that Ratzinger didn't reassign the predator, or know about the reassignment," said Barbara Blaine, of Survivors Network of those Abused by Priests.

The pope has also faced criticism for a letter he sent from the Vatican in 2001 advising all bishops that all cases of abuse were subject to pontifical secret and must be forwarded to his office. Germany's justice minister cited the document as evidence of a Vatican "wall of silence" around abuse cases.