• Robert Levinson went missing in March 2007 in Iran • US government paid £2.5m to family to prevent lawsuit • Associated Press publishes after years-long investigation

A retired FBI agent missing for seven years after disappearing in Iran was on an unauthorized mission for the CIA, according to an explosive new report on Thursday that contradicted the official explanation that he was on private business.

A years-long investigation by the Associated Press alleged in extensive detail that Robert Levinson, who disappeared from an Iranian island resort in 2007, had been involved in an extraordinarily unusual intelligence operation initiated by three CIA analysts who did not officially have the power to launch such operations.

It is unclear if Levinson, a father of seven children who would now be 65 years old, is still alive.

The US government has repeatedly and publicly denied that Levinson was in Iran on behalf of any government agency. As recently as 26 November, the White House issued a statement acknowledging Levinson as one of the “longest-held Americans in history”, reiterating a commitment to bring him home, and imploring the aid of Iran.

That statement, issued by White House press secretary Jay Carney, said Levinson went missing on “a business trip”. But in its report, the AP said that the US government paid $2.5m to Levinson’s family to forestall a lawsuit that would have likely resulted in details of the arrangement between Levinson and the agency coming to light.

The Associated Press said it established Levinson's CIA connections in 2010 but held off publication three times at the request of the government, evidently out of concern that Levinson’s life would be placed in jeopardy. The AP explained in a statement that efforts to find Levinson have for years come up empty.

“In the absence of any solid information about Levinson’s whereabouts, it has been impossible to judge whether publication would put him at risk,” said AP vice-president and executive editor Kathleen Carroll, who called the publication of the piece a “difficult decision”. She added: "With no more leads to follow, we have concluded that the importance of the story justifies publication.”

Christopher White, a CIA spokesman, neither confirmed nor denied Levinson's affiliation with the agency. “We have no comment on any purported affiliation between Mr Levinson and the US government. The US government remains committed to bringing him home safely to his family.”

According to the Associated Press, Levinson was brought on to a contract by the CIA in 2006, owing to his expertise in tracking illicit funds after a 28-year career at the FBI and with the Drug Enforcement Agency. His contract was with CIA analysts, who are not authorized to conduct intelligence operations.

Yet Levinson, who had been a private investigator since retiring from government work, preferred to gather intelligence, and did so in several Latin American countries for the CIA while being paid by a friend there, Anne Jablonski, evidently to conceal the extent of Levinson’s intelligence work. Levinson told Jablonski in 2007 that he was investigating corruption in the Iranian government – information that could be valuable for the CIA – and would travel to the region to meet with a contact.

On 8 March, he travelled to Kish Island, off the Iranian coast, to meet the contact, Dawud Salahuddin. Levinson checked out of a hotel the following day and disappeared.

“I have been held here for three and a half years. I am not in very good health,” Levinson stated in his only known proof-of-life video, made in 2010 and reportedly traced to an internet cafe in Pakistan. “I need the United States government to answer the requests of the group that has held me for three and a half years.”

According to the AP, the CIA initially and mistakenly told the FBI, Congress and the Bush administration that Levinson was not a CIA asset. Only when a friend of Levinson, former federal prosecutor David McGee, went through Levinson’s communications and alerted the Senate intelligence committee did the abductee’s relationship with the CIA become clearer.

The AP reported that following an internal investigation, the CIA in 2008 pushed Jablonski, a colleague and their boss into early resignations and retirements, and internally disciplined seven others. It created stricter rules for analysts’ dealings with outsiders, reflecting the impact Levinson’s case had – in secret.

It is unclear if the CIA referred any criminal charges for those involved in the Levinson case to the Justice Department. The then CIA deputy director Stephen Kappes was tasked with explaining the extent of Levinson’s involvement with the CIA in closed-door Senate hearings.

Brian Weiss, a spokesman for Senate intelligence committee chairwoman, Dianne Feinstein, said there would be no statement on the Levinson case on Thursday.

In response to the AP story, his family said the US could have done more to find him and bring him home.

"Bob is a courageous man who has dedicated himself, including risking his own life, in service to the US government. But the US government has failed to make saving this good man’s life the priority it should be," the family said.

"There are those in the US government who have done their duty in their efforts to find Bob, but there are those who have not. It is time for the US government to step up and take care of one of its own. After nearly seven years, our family should not be struggling to get through each day without this wonderful, caring, man that we love so much."

The AP explained that because investigators’ leads to Levinson had run dry, the public interest in revealing what it called the “serious mistakes and improper actions” that led to his disappearance compelled them to publish.

National Security Council spokeswoman Caitlin Hayden issued a statement criticizing the AP for publishing its story, but was similarly silent about Levinson's relationship with the CIA.

"Without commenting on any purported affiliation between Mr Levinson and the US government, the White House and others in the US government strongly urged the AP not to run this story out of concern for Mr Levinson’s life," she said. "We regret that the AP would choose to run a story that does nothing to further the cause of bringing him home. The investigation into Mr Levinson’s disappearance continues, and we all remain committed to finding him and bringing him home safely to his family.”

Tim Weiner, author of the acclaimed CIA history "Legacy of Ashes," said Levinson's case was "yet another case of carelessness at a cost of human life in the name of human intelligence."

The CIA's congressional oversight committees did not have immediate comment

Levinson’s family have sent up a website, helpboblevinson.com, to raise awareness. The website hosts the proof-of-life tape, in which Levinson implores the US government: “Please help me get home. Thirty-three years of service to the United States deserves something.”