Federal prosecutors said in a statement that the man was detained on Tuesday in the city of Potsdam southwest of the capital based on cooperative investigations by German and British authorities. In keeping with German privacy laws, he was only identified as David S.

Prosecutors on Wednesday said he is suspected of having spied for the Russian intelligence service at least since November.

Before his arrest, he worked as a local hire at the British Embassy in the German capital and allegedly passed on documents he received at work to the Russians, the prosecutors' statement said.

Foreign Ministry spokesman Christofer Burger said the German government was closely following the case.

"We take the indications that the intelligence activity of the arrested man was carried out on behalf of a Russian intelligence service very seriously," Burger said. "Spying on a close ally on German soil is not something we can accept."

Russian authorities have not yet publicly commented.

The British government provided few details about the embassy worker, saying that "an individual who was contracted to work for the government was arrested yesterday by the German authorities".

"It would not be appropriate to comment further as there is an ongoing police investigation," the statement said.

Britain's Metropolitan Police said in a separate statement that "the man was arrested in the Berlin area on suspicion of committing offences relating to being engaged in 'Intelligence Agent activity'."

"Primacy for the investigation remains with German authorities," the Met statement said, while "officers from the Counter Terrorism Command continue to liaise with German counterparts as the investigation continues".

The Met's Counter Terrorism Command is responsible for investigating alleged breaches of the Official Secrets Act.

German prosecutors said the suspect received an unknown amount of cash in return for his alleged spying activities. Investigators have searched his home and office, the statement added.

Later on Wednesday, the accused will be brought before an investigating judge at the federal court, who will read out the arrest warrant and decide whether to keep him on remand.

During the Cold War, Berlin was often dubbed as "the capital of spies" because the city was on the front lines of the confrontation between the Soviets in the East and the Americans and their western allies in the West.

Intelligence agents were active on both sides of the divided city and sometimes - after some espionage agents were caught - there were infamous cloak-and-dagger exchanges of captured spies on the Glienicker Bridge.

However, since the fall of the Berlin Wall in 1989, the unification of Germany a year later, and the end of the Cold War, espionage activities in Berlin have supposedly abated.

Australian Associated Press