With the issue receiving widespread coverage in Israel and the country's attorney general examining it, Netanyahu acknowledged on Monday that Arnaud Mimran, currently on trial in Paris, had given him $40,000.
Netanyahu said however that all had been done according to the law, and that the 2001 contribution was not political and occurred when he was not in public office.
The prime minister's office said the money was for a fund for Netanyahu's public activities, which included media appearances and travel abroad to promote Israel.
A political contribution of that size would exceed Israel's campaign finance limits.
Mimran told Israel's Channel 10 television late on Monday that the amount was actually some 170,000 euros ($193,000), transferred to Netanyahu's personal account.
He also said that previous reports that he had contributed one million euros were incorrect.
"First of all, I never said one million euros; I said one million," Mimran said in the interview.
"It was in 2001, so it was one million French francs -- 170,000 euros. I still have the bank statements, from Arnaud Mimran, my personal account, to Benjamin Netanyahu, his personal account."
Mimran also said he had financed trips to France for Netanyahu and his family, after the Israeli leader had already returned to politics.
Following the interview, Netanyahu's lawyer David Shimron dismissed Mimran's claims.
"The exact sum transferred by Mr Arnaud Mimran is $40,000," Shimron said via a spokesman for Netanyahu's Likud party. "The money was wired via a bank transfer to the fund's account on 24.8.2001.
"All the claims being levelled at Mr Netanyahu and inflated by the media will be shown to be unfounded and baseless," said Shimron.
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Netanyahu was asked about the matter on Tuesday in Moscow.
"What they have been unable to do at the polls, they try to do with baseless attacks," he told reporters.
"They speak of an illegal donation of one million euros for a campaign in 2009 and in the end it is a legal gift when I was a private citizen in 2001."
Mimran said in a report late Tuesday that he had given a journalist the wrong dates.
"Everything that Bibi said is true, I have the wrong dates," he wrote in a message carried by Channel 2 television.
Netanyahu left the prime minister's office in 1999 after being defeated by Labour's Ehud Barak. In 2002, he became foreign minister in then-prime minister Ariel Sharon's government.
He also lost the Likud primary to Sharon in 2002.
Mimran is one of the main defendants in a trial in Paris over an alleged scam amounting to 283 million euros involving the trade of carbon emissions permits and the taxes on them.
The allegations against Netanyahu are the latest focused on his spending.
Last month, the Israeli state comptroller issued a critical report on Netanyahu's foreign trips, some with his wife and children, in 2003-05 when he was finance minister.
"Trips by Mr. Netanyahu and his family, funded by external bodies during the period in which he served as finance minister, deviated from regulations on the subject and as such could give the appearance of obtaining a benefit or of a conflict of interest," the report said.