Soon after the attack Ukrainian police said they believed that Babchenko was killed because of his work as a journalist, but added that they would investigate other theories.
Babchenko left Russian Federation past year after he said he received a slew of death threats for his reporting.
Vasily Gritsak, head of the service, told reporters at a press conference that Babchenko's murder had been staged.
"I was informed a month ago", Babchenko was quoted as saying at a press conference.
Babchenko was shot and killed Tuesday evening in Kiev where he had been living since fleeing Russian Federation.More news: Washington Capitals' Tom Wilson defends hit on Vegas Golden Knights' Jonathan Marchessault
He had served in the Russian army during the two wars in Chechnya in 1990s and became one of Russia's best-known war reporters.
He also thanked the Ukranian Security Service for saving his life.
In a statement, the Russian Foreign Ministry said journalists were being killed with impunity in Ukraine.
A prominent Russian journalist and critic of President Vladimir Putin was shot dead in Ukraine where he had fled into exile following threats, police said on Tuesday.
Before ushering Babchenko into the room, Gritsak said investigators had identified a Ukrainian citizen who had been recruited and paid $40,000 by the Russian security service to organize and carry out the killing. "Now, for the most part, the people that Russians hate-it's all of you".
He said he was in fact alive and well.
His criticisms attracted the fury of pro-Kremlin officials and activists, as well as state media, and for years he endured regular abuse and threats.