Interior Minister Sheikh Jaber Khaled al-Sabah was quoted as saying that the lieutenant-colonel had been referred to the public prosecution for legal action after an internal probe found he had "collaborated with a neighbouring country".
The minister did not name the country but local media said it was Iraq.
Secret service chief Major General Suleiman al-Muhailan told Al-Seyassah newspaper that the officer is accused of "facilitating the entry of an Iraqi national" banned from entering Kuwait, by altering confidential security files.
Muhailan said the officer is accused of receiving a 6,000 dinar (22,400 dollar) bribe to delete a security ban against the unnamed Iraqi, a charge he has denied.
Several newspapers quoted legal and security sources as saying the officer is accused of assisting a number of pro-Iranian Iraqi nationals to enter Kuwait by removing security bans against them.
A retired army officer was also arrested for acting as a "middle-man" between the secret service officer and Iraqis, they said.
Under former leader Saddam Hussein, Iraqi forces invaded Kuwait in August 1990 and occupied it for seven months before being driven out by a US-led coalition.
Ties between the two Arab nations have been improving rapidly since Saddam was toppled after the 2003 US-led invasion of Iraq and executed for crimes against humanity in December 2006.
On Monday, Kuwaiti Prime Minister Sheikh Nasser Mohammad al-Ahmad al-Sabah accepted an invitation to visit Baghdad in what would be the first such trip in 18 years.
