Italian magistrates opened an enquiry into the relationship between Silvio Berlusconi and a teenage girl on Friday as the prime minister was still reeling from a court ruling partially stripping him of political immunity.
The probe will consider whether Berlusconi had sexual relations with the girl named Ruby between February and May 2010, when she was still a minor, the public prosecutor's office said in a statement.
Berlusconi will also be investigated for allegedly abusing his position of power on a night in May when he told police in Milan to free Ruby after she had been picked up for an alleged theft.
The scandal has been dubbed "Rubygate" by the Italian media.
The Corriere della Sera daily said the prime minister attempted "to hide the fact that he was a client of an underaged prostitute over several weekends at Arcore", his residence near Milan.
He wanted to ensure impunity for himself and prevent the details of parties in his home being revealed, it said.
ANSA news agency meanwhile said Berlusconi had been summoned to appear before a court, without giving a date.
The 72-year-old media mogul, a notorious womaniser, admits that he is "no saint" but has said he never paid for sex. He denies having had sexual relations with Ruby, whose real name is Karima El Mahroug.
Berlusconi lawyers Piero Longo and Niccolo Ghedini also rejected the allegations, calling the "new enquiry so absurd and unfounded that it would not even deserve a comment".
"The speculations have already been widely denied by the witnesses and those directly involved," they said in a statement.
The allegations are "a very serious interference in the private life of the head of government, which has no precedent in the country's legal history", they added.
Ruby, who turned 18 in November, claims she has been to parties in the prime minister's villa near Milan but also denies having sex with Berlusconi.
Interviewed by the Repubblica daily on Friday, the Moroccan girl said she had been to Arcore just three times for "normal dinners" and thought the prime minister was "lonely and unhappy".
The billionaire prime minister is already under scrutiny for organising parties with young women who are allegedly paid €5,000 ($7,000) for the evening, according to media reports.
Italy's top court on Thursday opened the way for corruption trials involving Berlusconi to resume after modifying a temporary immunity law that has shielded him.
Before the enquiry was announced on Friday, Berlusconi had said he was a victim of "political persecution on the part of left-wing magistrates".
The Corriere della Sera daily said on its website that police had searched the offices of Berlusconi associates, including a regional councillor and Giuseppe Spinelli, a close aide who manages some of the prime minister's assets.
A former call-girl, Nadia Macri, 28, said in November she had attended at least three of Berlusconi's parties, and described a selection process of young girls who were picked up on the street.