He said he was asked to allow construction of luxury apartments in a historic district of Salvador.
Marcelo Calero had previously blocked the plans. President Temer has denied the allegations.
However, he admitted talking to Marcelo Calero about the project.
Michel Temer has vowed to clean up corruption in Brazil, but has lost three ministers to corruption allegations.
The scandal involves government secretary Geddel Vieira Lima, who had bought a property in Salvador in Bahia state.
Marcelo Calero’s ministry vetoed the construction, on the grounds that the proposed building was on a heritage site.
He told the police both the president and the minister had pressured him to overturn the decision.
Earlier this week, an ethics panel decided to open an investigation into Geddel Vieira Lima over the allegations, before Michel Temer’s alleged involvement came to light.
Despite pressures to sack Geddel Vieira Lima, the president said the minister will keep his job.
Michel Temer came to power earlier this year, after former President Dilma Rousseff was impeached during a lengthy political crisis that gripped the country.
Dilma Rousseff was accused of manipulating the budget, but maintained her innocence and said that her political opponents have carried out a “parliamentary coup”.
Michel Temer has since tried to maintain a stable government, but has been plagued with corruption allegations against his own party.
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