The payment was authorised by the then UN envoy Jacques-Paul Klein and the government of Edhem Bicakcic, who served as premier of the Federation from 1997 to 2001, the Banja Luka-based Nezavisne Novine daily said in its Wednesday edition, quoting sources close to the investigation.
On Monday, Federation President Nikola Lozancic demanded an urgent investigation in order to find out who was responsible for Leutar's murder.
Lozancic told the newspaper he had information showing that the Federation's government had transferred 250,000 euros "into the account of a UN official".
"A protected witness was allegedly remunerated from the same account. I presume the Federal Prosecution will conduct an investigation and establish all the facts," Lozancic said.
Federal Prosecutor Zdravko Knezevic told Nezavisne Novine that an investigation was under way.
The newspaper quoted former federal deputy finance minister Sefika Hafizovic as saying that she had approved the payment of a portion of the 250,000 euros to protected witness Merim Galijatovic.
Leutar was assassinated in Sarajevo in March 1999 when his car was blown up. The perpetrators were never identified.
Five persons, including Leutar's driver, were acquitted of assassination charges by the Sarajevo Cantonal Court in November 2002. The acquittal was later upheld by the Federal Supreme Court.