Madeleine McCann suspect Christian Bruecker had previously made a chilling confession to a friend that led him to go to the police.
A source called Aberie, who used to be friends with Brueckner, said he confessed he had "accidently killed" his ex girlfriend Monika Pawlak.
According to The Sun, Aberie said the peadophile admitted he killed Pawlak when he was drunk.
Aberie went to the police in 2010, about the same time Pawlak was mutilated and stuffed in two bin bags.
Police investigated Brueckner at the time over her death in 2010, but he was never charged.
Details emerged at a summit between German and Portuguese cops to review the Maddie case.
Brueckner is currently serving a seven-year prison sentence for raping a 72-year-old American woman in Praia da Luz in 2005, about 18 months before Madeleine went missing.
German police say they have enough evidence to charge Brueckner and hope the probe into his alleged involvement will conclude next year.
German prosecutor Hans Christian Wolters told The Mirror: "We're confident we have the man who took and killed her."
Last week it was reported a former girlfriend of the German paedophile dropped a major clue that may help prosecutors.
When McCann vanished from a holiday resort apartment complex in Portugal in 2007, Brueckner fell silent when friends spoke about the missing 3-year-old.
But his ex-girlfriend Nakscije Miftari has now come forward, revealing Brueckner later admitted being nearby at the time McCann disappeared.
Miftari also said that the convicted paedophile, now 44, hit her when she discovered child pornography showing young blonde girls being abused on his phone.
In an interview with the Mail on Sunday, she said that McCann's disappearance had been raised by friends in 2014 at a party in their home in Braunschweig, Germany.
But Brueckner "made no answer".
Later on she confronted Brueckner about the topic, saying he went on to say: "I know about Maddie, I was near the hotel at the time.
"I was living in the area at the time. I am not going to say anything more. I am not a stupid guy, I am a businessman."
His former girlfriend had told German police of their conversation, and said she is petrified of him, describing him as controlling.
She came to meet him when she was 17, but their relationship ended when he unleashed a brutal attack on her when she discovered his child pornography on his devices.