Army experts have confirmed that ammunition seized by gardai in a north Dublin drugs raid came from the Defence Forces.
The shock revelation came last night after two men were charged in relation to drug offences.
Three rounds of ammunition have been confirmed to be from the Irish Army.
Military police are now working closely with gardai on the case.
"The fact that this ammunition belongs to the Irish Army is a very serious matter," said a senior source last night.
"This means that it is subject to two investigations - from the gardai and the Army.
"There is major concern over this matter," he added.
An Irish Army press officer would not comment on the matter when contacted by the Herald last night.
Gardai announced details of the drugs raid earlier this week.
A garda spokesperson said the operation was carried out as part of ongoing investigations targeting the activities of organised criminal groups in west Dublin.
The investigations are being carried out by the K-District Community Action team.
As part of the operation, a search was carried out at a property in the north Dublin area.
"A replica rifle, two replica handguns and quantities of ammunition were also recovered," said gardai.
"They were removed for ballistic examination, along with three samurai swords and €2k cash."
The major bust happened around 24 hours before gardai were involved in a separate unrelated massive drugs seizure in north Dublin which there was no arrests.
Gardai are investigating if this drugs bust is linked to an associate of slain gangster Martin 'Marlo' Hyland who was shot dead in December 2006.
The "under the radar" criminal who is aged in his 30s works in a legitimate job but has long been suspected of being one of the biggest traffickers in the locality.
Some of his close associates have previously been convicted of drugs offences.
"During the course of the search, cocaine with an estimated street value of up to €156,000 was seized," said gardai.
"Cannabis herb with an estimated street value of up to €35,000 was also seized."