The Munich public prosecutor's office is conducting an investigation into Petr Bystron, a prominent figure on the German far-right party's list for the European elections.
Petr Bysrton is under investigation for money-laundering activities, according to the Munich public prosecutor's office.
Bystron is facing allegations that he received up to €20,000 from individuals linked to Russian President Vladimir Putin to spread Kremlin propaganda.
He is the second candidate on the AfD's election list for theEuropean elections.
The prosecutor's office said searches are being carried out in Berlin, Bavaria and on the Spanish island of Mayorque in pursuit of evidence.
The German parliament voted to lift Bystron's parliamentary immunity, enabling the police to conduct their searches.
11 public prosecutors and nearly 60 Bavarian police officers have been mobilised, the Munich public prosecutor's office said.
In response, the chairmen of the AfD parliamentary group in the German Bundestag, Alice Weidel and Tino Chrupalla, issued a statement saying: "The AfD parliamentary group therefore hopes that the investigation will be completed quickly so that there is no suspicion that authorities and public prosecutors are trying to influence the European election campaign.”
The accusations mark a fresh blow against the AfD party, which is currently under scrutiny over allegations that it has links to China and Russia.
Fellow AfD member Maximilian Krah's assistant is under investigation for allegedly spying for China.
Krah himself is under initial investigation by prosecutors in Dresden over allegations of accepting payments from Russia and China during his time as an MEP.