Swedish police say, however, that they already know of the man's existence and have excluded him from their investigations.
The report, published on Monday in the German weekly news magazine Focus, is based on previously unreleased testimony with former Yugoslav security service officer Vinko Sindicic, now 67.
In a 2008 interrogation by German prosecutors, Sindicic said that Belgrade sent a Hamburg-based assassin to Stockholm to kill Palme.
Palme, who was gunned down the evening of February 28th, 1986 on Sveavägen in central Stockholm, had reportedly been shadowed round the clock by Yugslav security agents.
The murder weapon, a Smith and Wesson .357 Magnum, has never been found. According to Focus, the gun was smuggled to Sweden on a boat from the United States.
The magasine also reports that Palme's killer, now 65, lives in Zagreb, Croatia and works for a private security firm.
The head of the Swedish police taskforce charged with investigating Palme's still-unsolved killing, Stig Edqvist, told the Svenska Dagbladet (SvD) newspaper that his team has been aware of the information for some time.
“This came to our attention already in 1988 and since then we've followed it up quite thoroughly and been in contact on several occasions with the person who provided the information,” Edqvist told the newspaper.
While his team decided to stop pursuing the lead several years ago, he said that if the Focus report contained new information “which makes us rethink things, obviously we will.”
“Nothing is set in stone,” he told SvD.
Previous testimony from Sindicic helped German authorities solve a case involving a the 1983 killing of a Yugoslav dissident, according to Focus.