The suspect, identified only as Jian G. in accordance with German privacy rules, was arrested on Monday in the city of Dresden, prosecutors said in a statement.
German prosecutors did not name the MEP or specify who Jian G. had been working for since 2019.
Meanwhile, German magazine Der Spiegel has reported that it is MEP Maximilian Krah, of the far-right Alternative for Germany (AfD ), who is the party's main candidate for the European Parliament elections scheduled for early June.
The same magazine reports that the European Parliament has already suspended the suspected spy.
Jian G. is accused of working for the Chinese intelligence services and of repeatedly passing on information about negotiations and decisions in the European Parliament in January. Prosecutors allege that the aide also spied on Chinese dissidents in Germany.
In a statement today, German Interior Minister Nancy Faeser called the arrest of the alleged Chinese spy "extremely serious".
"If it is confirmed that the Chinese intelligence services spied on the European Parliament from the inside, it would be an attack on European democracy," said Nancy Faeser, following the announcement of the suspect's arrest.
"Anyone who employs that kind of official also bears responsibility," added the German minister.
"This case must be clarified precisely (...), all connections and backgrounds must be clarified," said Nancy Faeser.
The news of the arrest came a day after three Germans were arrested, in a separate case from Jian G., on suspicion of spying for China and organizing the transfer of information on technology with potential military use.