The Freiburg diocese said Archbishop Zollitsch strongly denied the charges, which were prompted by a complaint by the alleged victim, reports AFP in the Herald Sun.
"The accusations of criminal behaviour by Dr Robert Zollitsch in connection with the Birnau Monastery are without foundation," he said.
"The former human relations chief Archbishop Zollitsch was neither aware of the accusations from the 1960s nor of a new hiring of this priest and in no way ordered such a decision".
ARD public television reported earlier that the man who filed the complaint said he was abused at the Birnau Monastery in the Freiburg diocese in the 1960s.
Prosecutors said the man accused Archbishop Zollitsch, who was responsible for human resources in the diocese, of learning of the abuse but nevertheless assuring that the priest was employed again at Birnau in 1987.
Prosecutor Wolfgang Maier in Freiburg said the case had been passed on to the state prosecutor's office in Konstanz, southern Germany "without further review" because an investigation of the priest was already underway there.
"That is why I cannot comment on the substance of the accusations," he is cited saying.
SIC: CTHAUS