A TV documentary revealed Iris Robinson secured £50,000 from two wealthy developers, who were family friends, so 19-year-old Kirk McCambley could open a restaurant on the banks of the River Lagan.
But the Strangford MP faces allegations that she did not declare her financial interest in the business despite sitting on the local council which awarded the tender to her teenage lover in 2008.
In a statement, Castlereagh Council said a full investigation will be carried out.
"At a cross party meeting held this morning, the Acting Chief Executive was instructed to instigate a full investigation.
"In the interests of good governance, the Council will keep the local government auditor fully informed of this process," the statement read.
The BBC documentary also alleged Peter Robinson became aware of the situation but did not alert the appropriate watchdog bodies that his wife may have broken rules.
On Friday Mr Robinson said: "I completely reject BBC Spotlight's attempt to implicate me by insinuation and innuendo.
"I am even more appalled by the inclusion on that programme of comments and conclusions made without any supporting facts - indeed with facts in the programme which support a contrary position.
"While I have learned from Spotlight for the first time some alleged aspects of my wife's affair and her financial arrangements, I will be resolutely defending attacks on my character and contesting any allegations of wrongdoing. To that end, I will be addressing the media today after I have taken legal advice."
Reaction
Speaking to UTV, DUP environment minister Edwin Poots said party members had been "shocked" by the revelations.
"We will have to meet as a team and look at the implications", he said.
"Iris has done things that are clearly wrong. That's something that can't be undone. I expect there will be a response from the party on it."
"She hurt her family and people who have supported her and who have supported views that she expressed."
"In many respects, Peter is a victim in this. But he was aware money changed hands and he should have reported that to the House of Commons."
Sinn Fein Deputy First Minister Martin McGuinness also expressed his shock at the financial revelations made in the programme.
"I have sought an urgent meeting with the First Minister to discuss the implications for the Office of the First Minister and Deputy First Minister," he said.
Leader of the UUP, Sir Reg Empey told UTV that it would be "intolerable" if Mrs Robinson did not resign as MP, MLA and councillor immediately.
"The day cannot close without her removing herself from all of those positions, forthwith I think that would be the minimum that the public would expect and require," he said.
"I think it would be intolerable for her to be receiving a public salary and expenses between now and the summer, and I think she needs to be out of all these public offices by close of play today."
TUV leader Jim Allister said both Iris and Peter Robinson's positions were "utterly untenable".
"I think he has undoubtedly lost the moral authority to govern and he should resign", Jim Allister told UTV.
"Fifty thousand pounds paid over from the ask from two developers... Is there not a course for investigation into what is the history and ease with which developers paid such money to a politician?" he asked.
Gordon Brown's spokesman said: "The Prime Minister's view is that completing the devolution process is extremely important and Peter Robinson is very closely involved in that.
"Obviously there are personal issues that Peter Robinson has spoken about, but that is not for the Prime Minister to comment on."
Mrs Robinson, who announced last month that she was stepping down from public life because of mental health problems, issued a stunning statement on Wednesday admitting the affair and revealing that, wracked by guilt, she had tried to take her own life in March last year.
