Father Gabriele Amorth, who was appointed by the late John Paul II as the Vatican's chief exorcist and claims to have performed thousands of exorcisms, said Emanuela Orlandi was later murdered and her body disposed of.
In the latest twist in one of the Holy See's most enduring mysteries, he said the 15-year-old schoolgirl was snatched from the streets of central Rome in the summer of 1983 and forced to take part in sex parties.
"This was a crime with a sexual motive. Parties were organised, with a Vatican gendarme acting as the 'recruiter' of the girls.
"The network involved diplomatic personnel from a foreign embassy to the Holy See. I believe Emanuela ended up a victim of this circle," Father Amorth, the honorary president of the International Association of Exorcists, told La Stampa newspaper.
The debate over who kidnapped Emanuela and what became of her has raged in Italy for three decades.
It has been suggested that she was taken by the leader of a notorious gang of criminals, who wanted to put pressure on Vatican officials to recover money that he had allegedly lent them.
Another theory is that she was abducted to be used as a bargaining chip for the release from prison of Mehmet Ali Agca, the Turkish gunman who tried to kill John Paul II in St Peter's Square in 1981, reportedly on the orders of the KGB.
But Father Amorth, 85, dismissed the "international dimension", saying that a Vatican archivist had also come to the conclusion that Emanuela was abducted for sexual exploitation.
A controversial and outspoken priest, Father Amorth has claimed that yoga is Satanic because it leads to a worship of Hinduism and that the Harry Potter books are dangerous because they encourage children to believe in black magic and wizardry.
Earlier this month investigators opened the tomb of Enrico "Renatino" De Pedis, the gang leader, in order to check long-standing claims that the remains of the teenager were buried alongside him.
They found his remains inside the tomb in the Sant' Apollinare basilica in Rome and also, intriguingly, other bones in a crypt nearby.
Investigators said the unidentified bones probably dated from the early 19th century, but they are being analysed by forensic experts to see if any of them might belong to Emanuela.
In 2005, an anonymous caller to a crime programme on Italian TV claimed that the key to the schoolgirl's kidnap lay in the tomb of the mobster, who was gunned down by rival gangsters in 1990.