Blackwater initially provided perimeter security and protection
Guards from American security company Blackwater participated in CIA raids on suspected militants in Iraq and Afghanistan, the New York Times says.
It reported that the raids revealed a greater level of involvement between the spy agency and Blackwater than previously acknowledged by either.
Blackwater said it was "never under contract to participate in covert raids with CIA or Special Operations".
It was employed to provide security at bases for CIA staff.
In response to the New York Times article, a spokesman for Blackwater - now called Xe Services - said: "Blackwater USA was never under contract to participate in covert raids with CIA or Special Operations personnel in Iraq, Afghanistan or anywhere else.
"Any allegation to the contrary by any news organisation would be false."
'Snatch and grab'
The New York Times quoted various unnamed current and former Blackwater employees and agency staff describing so-called "snatch and grab" raids on suspected insurgents in Iraq from 2004 to 2006.
"Instead of simply providing security for CIA officers, they say, Blackwater personnel at times became partners in missions to capture or kill militants in Iraq and Afghanistan, a practice that raises questions about the use of guns for hire on the battlefield," the newspaper reported.
The company began work with the CIA providing security round the perimeter of bases in Iraq and Afghanistan, then moved to accompanying staff on missions.
The sources said they then became more deeply involved by planning the safest way to carry out operations to prevent any casualties among CIA staff.
Eventually, Blackwater staff themselves were allegedly participating in the raids.
Former Blackwater employees also alleged that they provided security on some CIA rendition flights transporting detainees between prisons in different countries.
One former CIA office was quoted by the paper saying: "There was a feeling that Blackwater eventually became an extension of the agency."
A CIA spokesman did not discuss Blackwater's contract, but did tell the paper that contractors are used to "enhance the skills of our own work force, just as American law permits".
Blackwater lost its contract to provide security for the State Department diplomats in Iraq after several of its guards were accused of killing up to 17 unarmed Iraqi civilians in 2007.
Four men are due to stand trial next year.
In August, the New York Times reported allegations that the CIA hired Blackwater for planning, training and surveillance as part of a secret programme to track and kill top al-Qaeda figures.