Holger Apfel was the leader of the NPD party from 2011 until late 2013 before resigning for what he described as "health reasons".
Now the leader of the far-right party has turned up in Majorca, local German-language daily the Mallorca Zeitung reported on Wednesday.
But Apfel says his new bar is not a meeting point for right radicals.
"We don't talk politics here, here everybody is welcome, including people on the left or people from other countries," the politician-turned-barman told the Mallorca Zeitung.
"What's important is the here and now," he added.The newspaper published a photograph of the one-time politician carrying drinks and looking cheerful in front of the Maravillas Stube (Tavern of Marvels), an establishment he is running with his wife in the Majorcan municipality of Playa de Palma.
Apfel's sudden departure from the NPD during over Christmas 2013 was treated as suspicious by his own party, after rumours about his private life emerged.
"Further allegations concerning misconduct in the past" must be addressed by Apfel, the NPD said in a statement.
The party did not go into details about this misconduct, but Spiegel reported that the party leadership would look into allegations that Apfel had been open to blackmail.
Almost one third of officials within the far-right National Democratic Party (NPD) have been convicted of crimes or are being investigated in connection with criminal activities, according to a document published by Germany's Constitutional Court, which wants to ban the party.