Martin McGuinness personally set up the rendezvous which led to the brutal murder of a suspected IRA informer, the Government was told in 1987.
Previously secret files in the Department of Foreign Affairs reveal the then Bishop of Derry Edward Daly made the damning claim seven months after the killing of Frank Hegarty.
Bishop Daly said Mr McGuinness normally did not get his "hands dirty" but had run out of henchmen in the city.
Mr Hegarty, a Provo quartermaster in Derry, was abducted from Buncrana, Co Donegal, and shot in the head in May 1986 after he had been lured home with claims he would be safe.
His body was dumped on the side of a border road with his eyes taped.
A typed letter, marked secret, was filed to the Department of Foreign Affairs by an official who had met Bishop Eddie Daly and talked about the execution.
Released under the 30 year rule, it said: "The Bishop understands that, far from using a henchman (as he would ordinarily do), McGuinness personally arranged the rendez-vous with Hegarty from which the latter did not return."
Bishop Daly said the former IRA commander turned peacemaker had been doing "reckless things" at the time.
He said these actions would make Mr McGuinness "vulnerable if he were to come under media scrutiny".
Over the years Mr McGuinness, who died last March, faced repeated questions over the Hegarty murder but always insisted he had "no role whatsoever".
The dead man's family have said the former Deputy First Minister persuaded Mr Hegarty to come home. And Bishop Daly believed them.
It is understood Mr Hegarty fled to England, protected by British intelligence, and is reported to have given information on a dump of IRA arms smuggled from Libya before being lured home.
Bishop Daly said Mr McGuinness assured relatives on a number of occasions that Mr Hegarty would not be harmed.
The Bishop was reported to have said: "McGuinness would usually try to 'keep his own hands clean' in an affairs of this sort but, with the number of Provo volunteers in Derry reduced... by rumours that Hegarty had 'squealed', McGuinness was left in a position for several months last year in which he had to do much of 'the dirty work' on his own."
Bishop Daly said he was certain Mr McGuinness was a Provisional IRA Chief of Staff "at least for the North-West if not for the entire North".
The letter was dated January 22 1987, about seven months after the murder.
It was sent to Dublin and copied to the Tánaiste and the Ambassador in London, as well as the secretary of the Irish Government's Anglo-Irish Secretariat.
It has been reported Mr McGuinness met Mr Hegarty's mother Rose on numerous occasions as he tried to coerce him to return home, including a claim he went down on bended knee.
A sister of Mr Hegarty is also said to have unwittingly driven him to the rendez-vous in Buncrana.
The documents can be read in the 2017/20/17 file from the Department of Foreign Affairs.
Martin McGuinness also threatened to hold a dead IRA man's body for a week amid tensions over paramilitary shows of strength at funerals, the state papers have revealed.
He personally delivered the chilling message to Bishop Cahal Daly's secretary as a stand-off ensued over the burial of Larry Marley in Belfast in April 1987.
Marley, the mastermind of the 1983 Maze escape, was shot dead by the UVF in front of his wife and newborn son at their home in Ardoyne.
Amid a huge security operation, his funeral was delayed for three days and there were two failed attempts to bury him as a heavily armed police cordon stepped in each time to stop shots being fired.
At one point during the stand-off Marley's body had to be embalmed for second time while in the family home and the RUC threatened to seize the remains under public health laws.
Documents released from the Department of Foreign Affairs reveal Mr McGuinness issued the warning to the bishop's emissary Fr Hugh Starkey as he mediated between the Marley family and the RUC.
He said McGuinness told Cahal Daly's secretary: "We have the body and will keep it for a week, if necessary, until the Bishop speaks."
The papers claimed Mr McGuinness was smarting over comments made by Bishop of Derry Edward Daly about restricting IRA funerals amid paramilitary shows of strength.
Bishop Edward Daly had raised concerns that he had to say "enough is enough" and feared that if he did not take "strong and dramatic" action that some Provos might be emboldened enough to fire shots inside a church rather than outside.
A Foreign Affairs official said Mr McGuinness wanted to force Bishop Cahal Daly to make a public statement, "preferably a rebuke to the police and sympathy with the predicament of the family".
He noted that the Bishop "wisely refused to be drawn into this trap".
"Bishop Daly's refusal to act according to Sinn Fein's bidding has created a resentment towards the Church in that section of the nationalist community which Fr Starkey hopes will only be temporary," the file said.
Marley's funeral and burial lasted seven hours. A Foreign Affairs official watching the events said it was the "biggest propaganda coup since the 1981 hunger strike".
In the days after the funeral, Cahal Daly, then Bishop of Down and Connor, called on the RUC to rethink its approach to dealing with paramilitary funerals.
The documents also state that Fr Starkey reported suspicions that Marley had been "set up by his own people" as part of an internal Provo feud.
The priest recalled one visit to the Marley home during the stand-off as "unsettling and macabre".
With the coffin in the house, Fr Starkey said prayers while an IRA guard of honour stood by.
The funeral eventually took place with the RUC keeping three feet from the mourners who flanked the coffin.
Fr Starkey told Foreign Affairs he felt he pulled a "master stroke" just before the coffin was taken from the house when he told everyone in the house to get on their knees and recite the rosary.
He said it reminded them it was a religious ceremony not a political event.