The Independent Police Investigative Directorate (IPID) will establish if National Police Commissioner Riah Phiyega told her Western Cape police boss his links to a local businessman were being looked into.
"We will conduct an independent and impartial investigation," the watchdog's acting executive director Koekie Mbeki said in a statement.
Phiyega said she welcomed the probe and 'still maintains that she committed no crime', according to a police statement.
Faced with calls from critics for Phiyega to be sacked, Police Minister Nathi Mthethwa called for patience from the public to allow time for the probe to be completed.
"It is... Important to allow IPID an opportunity to do their work without undue interference," he said in a statement.
Phiyega is the first woman to head South Africa's deeply troubled force.
Two of her immediate predecessors left the job dogged by allegations of graft.
But under her watch, the 198,000-strong force has been battered by many crisis.It was pilloried for shooting 34 striking miners last August. It was also humiliated over its handling of the murder case against paralympic sprinter Oscar Pistorius when it emerged the investigating officer himself faced charges of attempted murder for shooting at a taxi.
On an average one person died every day in South Africa last year as a result of police action, according to IPID.
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