Suspected Mossad agent Ben Zygier was arrested by his own spymasters after they believed he told Australia's domestic intelligence agency about every aspect of his work with the Israelis, sources say.
The ABC's Foreign Correspondent program understands that Zygier met with ASIO officers in Australia and gave comprehensive detail about a number of Mossad operations, including plans for a top-secret mission in Italy that had been years in the making.
It is unknown who initiated the contact.
Sources have told the ABC that on one of four trips back to Australia in the years before his death in 2010, Mr Zygier - who also used the surnames Alon, Allen and Burrowes - applied for a work visa to Italy.
Last week, Foreign Correspondent revealed Zygier was secretly jailed in Israel's Ayalon prison, where it is claimed he committed suicide after 10 months in prison.
His incarceration was a state secret in Israel; the nation's security services went to extraordinary lengths to conceal his plight.
The company exported electronic components to Arab countries as well as Iran.
Zygier returned to Australia frequently with his wife and children, at one stage enrolling in an MBA at Monash University.
It was during one of those visits he had contact with ASIO.
The relationship between Israel's intelligence agencies and ASIO soured when Australia expelled an Israeli diplomat in 2010, after an investigation found Australian passports were used in a suspected Mossad operation to assassinate Palestinian arms trader Mahmoud Mabhouh.
Foreign Correspondent's revelations last week have caused a political earthquake in Israel, with prime minister Benjamin Netanyahu calling for his citizens to support the work of intelligence agencies.
Zygier's death has been the subject of a top-secret investigation in Israel that ended only two months ago. A judge found he had killed himself in his highly secured, which was reportedly suicide-proof cell.
The judge also ordered an investigation into whether prison guards were derelict in their duty.
In Australia, Foreign Minister Bob Carr is set to release his own inquiry into the affair, expected to outline to some extent "which agencies knew what" of Zygier's arrest and death, and how the Department of Foreign Affairs managed the case.