A woman told Dutch police this month that Joran van der Sloot confessed to her years ago that he was involved in Holloway's disappearance, according to Ann Angela, a spokeswoman for the Aruba Prosecutors' Office.
But the Dutch Caribbean island's chief prosecutor said authorities still lack proof they need to convict Van der Sloot, who has been arrested twice and released for lack of evidence.
"After three years of investigating, it is very, very difficult to find that evidence," prosecutor Hans Mos told The Associated Press. "We have to be realistic."
Holloway, an 18-year-old from Mountain Brook, Ala., was last seen in May 2005 leaving a bar in the Aruban capital Oranjestad with Van der Sloot on the final night of a high school graduation trip to the island. Extensive searches have found no trace of her.
Investigators reopened the case earlier this year based on hidden-camera recordings made by a Dutch TV crime show. On the video, Van der Sloot says Holloway collapsed on the beach after they left the bar and that he called a friend to dump her body at sea.
The new witness, once a friend of Van der Sloot, confirmed that he gave her roughly the same account shortly after Holloway's disappearance. But Mos said her statement does not bring authorities any closer to resolving the case.
He also said the witness would lack credibility in court unless she explains why she waited so long to come forward.
Attorneys for Van der Sloot did not immediately respond to messages seeking comment and there was no answer at his parents' home in Aruba.
Van der Sloot was last known to be living in Thailand but his current whereabouts are a "mystery," Angela said.
Angela said Aruban authorities hope to decide by the end of this year whether to prosecute Van der Sloot or close the case for good.