Hilton Botha was charged with seven counts of attempted murder, accused of shooting at a minibus in 2011. Two other officers also allegedly fired at the minibus.
Bulewa Makeke, spokeswoman for South Africa's National Prosecuting Authority, acknowledged Thursday that the timing of the attempted murder charges is "totally weird" but said Botha should be dropped from the case against the world-famous athlete.
However Makeke said the charges against Botha were reinstated against Botha on Feb. 4, before his testimony Wednesday and even before Steenkamp was killed.
Police said they were notified Wednesday of the reinstated charges.
The bail hearing for Pistorius, 26, a double-amputee Olympian, continued Thursday in Pretoria. His lawyers must prove there is an exceptional reason to have him freed before trial and that he is not a flight risk.
Pistorius is charged in the shooting death of his model girlfriend, Reeva Steenkamp, on Valentine's Day. Police say the shooting was premeditated. Pistorius has said he thought he was shooting at an intruder.
Pistorius, a sporting icon and source of inspiration to millions until the shooting last week, is backed by a high-powered team of lawyers and publicists. The abruptness of his fall, and its gruesome circumstances, have gripped a global audience and put South Africa's police and judicial system under the spotlight.
In a news conference at a training academy, National Police Commissioner Riah Phiyega said a senior detective would gather a team of "highly skilled and experienced" officers to investigate the killing of 29-year-old Steenkamp, a model and budding reality TV contestant.
The decision to put police Lt. Gen. Vinesh Moonoo in charge came soon after word emerged that the initial chief investigator, Hilton Botha, is facing attempted murder charges, and a day after he offered testimony damaging to the prosecution.
Botha acknowledged Wednesday in court that nothing in Pistorius' version of the fatal shooting contradicted what police had discovered, even though there have been some discrepancies. Botha also said that police left a 9 mm slug in the toilet and lost track of allegedly illegal ammunition found in Pistorius' home.
Pistorius' main sponsor, Nike, meanwhile, suspended its contract with the multiple Paralympic champion, following eyewear manufacturer Oakley's decision to suspend its sponsorship. Nike said in a statement on its website: "We believe Oscar Pistorius should be afforded due process and we will continue to monitor the situation closely."
Botha is to appear in court in May to face seven counts of attempted murder in connection with the minibus shooting incident. He has been quoted in the South African media as denying allegations he was drunk at the time, saying he and the other officers were trying to stop the vehicle and didn't know there were people inside.
While Botha has been dropped from the Pistorius investigation, he has not been suspended from the police force, Phiyega said, and could still be called by defense lawyers at trial.
Botha testified Thursday that he investigated a 2009 complaint against Pistorius by a woman who said the athlete assaulted her. However, Pistorius did not hurt the woman, who in fact injured herself when she kicked a door at Pistorius' home, Botha said.
The Associated Press contributed to this report.