Suspect Christian Brueckner is said to have lived on the site in Hanover.
One local said: “I saw up to 100 police officers.”
The witness told how police probing the young girl’s disappearance flocked to search a site in Germany where Brueckner is said to have once lived.
Officers used a digger and sniffer dog as they scoured the allotment during the “large-scale” operation that lasted several hours.
It remained unclear tonight if the team were looking for a body or other evidence linked to the case.
Divers were also spotted by locals searching the River Leine in the nearby town of Seelze.
Police have confirmed the hunts were in connection with Madeleine, who vanished from her family’s holiday apartment on the Algarve in May 2007 aged nearly four.
Mobile phone records proved Brueckner was in Praia da Luz on the night she disappeared.
One local claimed the German paedophile lived at the allotment site for a short while. And it is just four miles from where Brueckner used to live in Hanover after returning from Portugal.
Witness Marc Niemtschke said: “I saw up to 100 police officers at the scene.
“The main area of the search is on land where there is a bungalow, which is being used as a second home, and a garden shed.”
The searches were carried out in a joint operation by German federal police and the prosecutors’ office in Braunschweig, where Brueckner was convicted of rape last year,
Prosecutor Julia Meyer said: “I can confirm that the search is being carried out in connection with our investigations into the Maddie case.
“However, I will not comment on the background and aim of this action or the status of the ongoing investigations.
“Police will need more time to finish their search.”
At the allotment an orange excavator dug a large hole in the ground and officers wearing masks and head torches could be seen inside it.
Police erected a temporary fence around the site after they started their search at dawn, meaning they could only be seen through some trees.
Some wore forensic suits and others used rakes and shovels to comb the area. Trees were cut down to assist the search, while several police vehicles were parked outside.
There was a prison van at the scene, although there is no indication Brueckner had changed his mind and is now assisting police in their inquiries.
German officials claim they have proof Madeleine is dead.
Brueckner, 43, was named as prime suspect in the case last month. But prosecutor Hans Christian Wolter told her parents Kate and Gerry: “We can’t say why she is dead.
“It is more important that we are successful and we are able to get the culprit, as opposed to just putting our cards on the table and tell them why we think she might be.”
Kate and Gerry, of Rothley, Leics, refuse to give up hope of finding their daughter alive. But after the latest police appeal in the case, they said: “Whatever the outcome may be, we need to know as we need to find peace.”
The Met Police’s Operation Grange on Madeleine’s disappearance is still a missing person inquiry and chiefs insist there is no “definitive evidence whether she is alive or dead”.
Three years after the youngster vanished, Brueckner was living in Hanover working part-time in a garage where he was nicknamed “the screwdriver” because he always smelled of oil and petrol.
Brueckner was questioned over the murder of a sex worker in the city in 2010 but he was never charged. Monika Pawlak, 24, was killed in the early hours of New Year’s Day.
Her dismembered body was found four days later in two rubbish bags in a river.
Brueckner regularly travelled between Portugal and Germany in his campervan, which could have easily been used to transport children without attracting attention.
He was arrested on child abuse charges and police later discovered several girls swimming costumes in the vehicle. He was also convicted of forgery of documents in 2010, while he was living in Hanover.
Brueckner is currently in a German jail on drugs offences. He has been linked to a string of other unsolved attacks across Europe including some in Holland, Germany and Portugal.
Police have reopened the case of Inga Gehricke who wandered off in a forest to find wood for her family’s camp fire at the age of five and was never seen again.
She disappeared in Saxony-Anhalt, Germany, on May 2, 2015. At the time it was alleged Brueckner shared a sickening fantasy in a chatroom about the kidnap and sexual abuse of a child. He allegedly said he wanted to “capture something small and use it for days”.
Brueckner has been convicted of the 2005 rape of an American pensioner in Praia da Luz, where Madeleine vanished.
He is awaiting the result of an appeal to the European Court of Human Rights in Luxembourg on whether he should be freed through a legal loophole.