A statement released by the ministry on Monday says Chinese intelligence made contact with Cmdr. Chang Chih-hsin through unidentified Taiwanese intermediaries.
The ministry denies media reports that Chang had leaked secretive submarine nautical charts or war plans to the Chinese.
The ministry says it was tipped off by informers. Authorities say they had investigated him even before his retirement, which newspaper reports say was in August.
Taiwan and China have spied on each other since the sides split amid civil war in 1949. Their espionage efforts have continued despite a marked decrease in tensions between them during the 4 1/2-year administration of Taiwanese President Ma Ying-jeou.