Police divers were seen entering the water early on Tuesday at the Barragem do Arade reservoir, about 30 miles from Praia da Luz, where Madeleine went missing in 2007.
Tents had been erected on the banks of the reservoir and officers from Portugal, Germany and the UK were seen holding morning briefings on Tuesday, the BBC reported.
A police motor boat was sent into the water with two officers on board.
Portuguese police confirmed on Monday that they are co-ordinating searches in the Algarve at the request of German police and in the presence of British officers.
A brief statement from the prosecutor’s office in the German city of Braunschweig confirmed the search but did not reveal why it was taking place.
It has been reported that the prime suspect in Madeleine’s disappearance, convicted sex offender Christian Brueckner, 45, spent time in the area between 2000 and 2017.
Investigators believe he killed Madeleine, then aged three, after abducting her from a holiday apartment.
Brueckner, who has denied involvement in Madeleine’s disappearance, was identified as a suspect by Portuguese officials in June 2020.
The Sun reported that the search was sparked after German investigators discovered video and photos of Brueckner near the reservoir.
A no-fly zone has been put in place over the water and media and other onlookers are being kept a mile back from the site of the search, the newspaper said.
He is facing charges in Germany over a number of separate sex offences allegedly committed in Portugal during that time.
German authorities are expected to release a statement about the search later on Tuesday.
It is not the first time the reservoir has been searched.
In 2008, Portuguese lawyer Marcos Aragao Correia paid for specialist divers to search it after he claimed to have been tipped off by criminal contacts that Madeleine’s body was there.
The most recent search in Portugal in relation to her disappearance was in 2014, when British police were given permission to examine scrubland near where she vanished.
Earlier this month, Madeleine’s parents Kate and Gerry McCann posted a short statement on their Find Madeleine Campaign website to mark the anniversary of her disappearance.
They said: “Today marks the 16th anniversary of Madeleine’s abduction.
“Still missing… still very much missed.
“It is hard to find the words to convey how we feel.
“The police investigation continues, and we await a breakthrough.”
