Aleksejs Holostovs, a former member of the Harmony political party, which draws much of its support from the country's large Russian minority, told the LETA news service he was "surprised" at the allegation of spying from Russia.
He declined further comment, saying he was unaware that he had been called a spy.
According to a report broadcast today by Russian TV channel NTV, Holostovs was believed to be spying for the Latvian security service, which was in turn working for the CIA.
Tensions have been high between the Baltic states and their former masters in Moscow since the crisis in Ukraine began in February.
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Latvian foreign ministry spokesman Karlis Eihenbaums told Latvian radio the incident was being investigated, but said that Russia expelling Holostovs was not helpful.
"Such behaviour is extremely regrettable... What we see now, unfortunately, is that it is happening more and more often. It can be explained by the fact that Russia, in its international relations, is not behaving in line with what we would expect in the 21st century," Eihenbaums said.
Holostovs served as a Latvian MP from 2006 until 2011 but quit the Harmony party last year and is currently pursuing business interests in real estate.