The Italian weekly L'Espresso said prelate Battista Ricca had gay relationships during his time at the Vatican embassy of Montevideo in Uruguay, as well as an affair with a Swiss army officer, which ultimately saw him sent back to Rome in disgrace.
Vatican expert for L'Espresso Sandro Magister said Ricca provided lodgings and a pay check for captain Patrick Haari in 1999 and was once left badly beaten after trawling notorious gay hangouts before his behaviour saw him transferred out of Montevideo in 2000.
He also allegedly got stuck in an elevator with a young gigolo he had invited to the embassy for the night, and had to be rescued.
An internal bid to protect him and cover up the scandal meant Francis apparently had no idea about Ricca's past before he appointed him as his personal representative at the scandal-hit bank this year.
Ricca went on from Montevideo to hold several prestigious positions in Rome, including the director of the Santa Martha residence where the pope lives.
"This allowed him to weave an intricate network of relationships with the highest levels of the Catholic hierarchy all over the world," relationships which would help bury past allegations against him, Magister said.
He said the wiping of Ricca's records was an example of a "gay lobby" at work in the Vatican.
Vatican spokesman Frederico Lombardi brushed off the story as "not credible" but the magazine insisted the allegations were confirmed by primary sources. It said "numerous bishops, priests, religious and laity" in Uruguay had testified against Ricca.
Religious watchers said the leaks about Ricca's past may be an internal attempt to block the prelate from carrying out reforms.
In June, Francis admitted the existence of a "gay lobby" inside the Vatican's secretive administration, the Roman Curia.
"In the Curia, there are truly some saints, but there is also a current of corruption... There is talk of a 'gay lobby' and it's true, it exists," he was quoted as having said during an audience with CLAR (the Latin American and Caribbean Confederation of Religious Men and Women).
The admission followed Italian media reports in February which claimed that a secret report by cardinals investigating leaks from within the Vatican included allegations of corruption and blackmail attempts against gay clergymen, and on the other hand, favouritism based on gay relationships.
If the allegations are proven to be true, it would be a blow to Francis's attempts to clean up the scandal-hit Vatican.
NOTE: AFP corrected an earlier version of this article, which referred to a Swiss army officer reportedly involved in an affair with Ricca as a Swiss guard.