Baroness Uddin says she has not done anything wrong
Labour peer Baroness Uddin is to be investigated over allegations that she used a reportedly empty flat to claim £100,000 in public allowances.
The House of Lords authorities are to look into the allegations, relating to a Kent property owned by the peer.
The Sunday Times said the peer stated this was her main residence and claimed a second home fee for a London flat.
Baroness Uddin said she "welcomed" the investigation, insisting that she had not broken the parliamentary rules.
She said she had "regularly" stayed in the two-bedroom Kent property and would co-operate fully with the inquiry.
According to the Sunday Times, the peer designated the flat as her main home, enabling her to claim the second home allowance for a separate property in east London, only several miles away from Parliament.
The newspaper quoted neighbours of Baroness Uddin's in Kent as saying that the property was not occupied or even furnished.
The investigation, to be carried out by the Clerk of the House of Lords, was triggered by complaint from the SNP.
Following a meeting with Baroness Royall, Labour leader in the House of Lords, Baroness Uddin issued a statement noting the investigation into her expenses claims.
"I welcome this review and will co-operate fully with him in the hope of a speedy resolution and clarify that I did not break the rules of the House," she said.
Baroness Royall said the Clerk would report his findings to the House of Lords committee on members' interests.
This committee is already investigating allegations that four peers were prepared to amend legislation in return for cash, claims they all deny.
The BBC's political correspondent Carole Walker said the investigation would raise further questions about the integrity of Parliament at a time when the institution was already under fire.
Baroness Uddin, a former deputy leader of Tower Hamlets Borough Council, was made a life peer by Tony Blair in 1998.
The SNP welcomed the decision by the Parliamentary authorities to look into the matter but also called for the police to begin an investigation, saying a "huge" amount of money was at stake.
"That someone can claim an allegedly unfurnished and unoccupied flat is their main residence beggars belief and we need full and frank answers from Baroness Uddin," said the party's Westminster leader Angus Robertson.
The row is the latest over the controversial second homes allowance used to compensate MPs and peers for having to stay in London to carry out their parliamentary duties.
A series of disputes over claims made by Labour ministers prompted Gordon Brown to refer the issue of the second homes allowance for MPs to the Committee on Standards in Public Life.
Mr Brown had called for the second homes allowance to be scrapped in favour of a daily attendance fee for MPs but backed away from a vote on the issue after opposition parties and some Labour MPs refused to back the measure.