The complaint targets Robert Eringer, an American who says he once worked as the prince's intelligence adviser, and who has accused Albert of breaking International Olympic Committee rules by accepting lavish gifts from Russia before and after the IOC awarded the 2014 Winter Olympics to the Russian city of Sochi.
The prince has been an IOC member since 1985 and competed in five Winter Olympics as part of Monaco's bobsled team.
The palace of the tiny Mediterranean principality said Wednesday that the suit was a response to the "many untrue and defamatory claims spread by Mr. Eringer."
In a statement, the palace included what it said were excerpts from a letter from IOC President Jacques Rogge offering Albert his "total support."
"The IOC has never at any moment taken these accusations seriously," the statement cited Rogge's letter as saying.
On his blog, Eringer wrote that Albert "allowed himself to be corrupted by Moscow" by accepting the gift of a dacha built by Russian laborers on the grounds of his private retreat on Monaco's outskirts.
Eringer's lawyer sent a copy of the suit to The Associated Press but did not immediately return calls seeking his client's reaction.
The legal complaint also mentions other passages Albert is seeking to have removed from the blog.
In one, Eringer alleges that Monaco has not done enough to investigate allegations of World War II plundering of the property of Jews who were sent to Nazi death camps.
The two men have already faced off in another legal battle: Eringer filed suit in 2009 in California seeking $59,600 in back pay. The court filing by Albert's lawyer says Eringer carried out "intelligence missions" for the prince but was never a civil servant for Monaco.