Germany's motor vehicle authority KBA is investigating Daimler on suspicion that 60,000 Mercedes cars were fitted with software aimed at tricking emissions tests, the Bild am Sonntag newspaper reported on Sunday.
A spokesman for Daimler, owner of Mercedes-Benz, said the carmaker was reviewing the facts and fully cooperating with the KBA.
Bild am Sonntag said the KBA was looking into suspicious software in Mercedes-Benz GLK 220 CDI cars produced between 2012 and 2015, after tests showed they only meet emissions limits when a certain function is activated.
Since rival Volkswagen admitted in 2015 to cheating U.S. emissions tests, the scandal has spread to other carmakers. Daimler has ordered the recall of 3 million vehicles to fix excess emissions coming from their diesel engines.
Bild am Sonntag said the KBA found that the function it had discovered had been removed during software updates carried out by Daimler.
The Daimler spokesman said the company had complied with a process agreed upon with the KBA and German Transport Ministry when updating software for the 3 million recalled vehicles.
"The allegation that we wanted to hide something with the voluntary service measure is incorrect," he said.
This month European Union antitrust regulators charged BMW, Daimler and Volkswagen with colluding to block the rollout of emissions-cleaning technology.
(Reporting by Emma Thomasson; Editing by Susan Fenton)