Carlos Tavares, Chairman of the Managing Board of French carmaker PSA Group addresses the media during the 87th International Motor Show at Palexpo in Geneva, Switzerland March 7, 2017. REUTERS/Arnd Wiegmann

PARIS (Reuters) - The French investigation into alleged emissions cheating by PSA Group PEUP.PA found that suspect software had been used on almost 2 million vehicles sold by the maker of Peugeot and Citroen cars, Le Monde reported on Friday.

Paris-based PSA denies any use of fraudulent engine software, a spokesman said in response to the newspaper report, which sent PSA shares sharply lower. The stock was down 4.4 percent at 17.78 euros as of 1019 GMT.

So-called “defeat devices” restrict exhaust output of toxic nitrogen oxides (NOx) under regulatory test conditions while letting emissions far exceed legal limits in real-world driving.

In February PSA became the fourth carmaker to be referred to French prosecutors by the country's DGCCRF watchdog over suspected emissions test-cheating, after Volkswagen VOWG_p.DE, Renault RENA.PA and Fiat Chrysler FCHA.MI.

PSA’s engineering chief acknowledged at the time that emissions treatment in the group’s diesels was deliberately reduced at higher temperatures to improve fuel efficiency and carbon dioxide (CO2) emissions in out-of-town driving, where NOx output is considered less critical.

According to Le Monde, an internal PSA document obtained by DGCCRF investigators includes discussion of the need to “make the ‘defeat device’ aspect less obvious and visible”.

However PSA insists there is nothing fraudulent or illegal about its engine calibrations.

“PSA denies any fraud and firmly reaffirms the pertinence of its technology decisions,” the company said on Friday.