A convicted killer is reported to have told gardai about Murphy's confession - which prompted fresh searches of the Wicklow countryside last month.
The prisoner who approached detectives told of how Murphy discussed taking Ms Jacob (19) into the Wicklow Mountains before killing her with a hammer. It's also claimed he dumped her body in a lake.
Search teams and garda divers scoured parts of a lake in the west of the county on December 3 -- close to where Murphy had worked.
Further searches are now likely in the coming weeks as detectives from the Garda Cold Case Unit investigate the inmate's claims.
It's understood that five locations have been drawn up by officers investigating Ms Jacob's disappearance in 1998.
The inmate in question, who is serving a life sentence for murder, alleged that Murphy admitted during a drinking session in Arbour Hill to killing Ms Jacob.
The confession is alleged to have been made more than two years ago -- just before Murphy finished serving 10 years of a 15-year sentence. The inmate claimed that Murphy openly discussed killing the teenager and disposing her body.
Murphy (47) is alleged to have spoken about how he scattered toys on the back seat of his car so that his victim would feel comfortable talking to him.
He is then alleged to have confessed to knocking Ms Jacob out before dragging her inside the vehicle.
The information is understood to have been made to two former detective sergeants and is being taken seriously by investigating gardai.
Gardai carried out the search of the lake last month as part of Operation Trace, which is probing the disappearance of six women in the Eighties and Nineties. Murphy was released from prison in August 2010 and was last spotted in Amsterdam.
Ms Jacob, a trainee teacher, was snatched in broad daylight near her home in Newbridge in July 1998.
The fresh claims will come as devastating news to her family.
Murphy became the most feared sexual predator in recent times when he was convicted of the rape and attempted murder of a businesswoman in February 2000.
He served 10 years for his crimes and was exposed in November as living a new life in Amsterdam where he has befriended a double rapist.
Nicknamed the 'Beast Of Baltinglass', Murphy remains the chief suspect for the disappearances of Deirdre Jacob, as well as Annie McCarrick and Jo Jo Dullard.