The agent, Patrick Daly, wrote more than 50 letters and cards to Peter Jordan in prison, offering to launch a campaign on his behalf and persuading him not to go on hunger strike.
He told a jury that in the 1980s he drove Jordan on a surveillance mission in a plan to blow up a military leader - described in court as Colonel Batty. 'I drove Peter Jordan to the vicinity of Col Batty for reconnaissance and reported to Special Branch of everything I had done.'
Jordan was subsequently arrested and convicted.
Mr Daly denied he had 'set up and framed' Jordan, but had passed on the information to his Avon and Somerset Special Branch handlers.
He was shown one letter in which he allegedly told Jordan: 'Always remember you have friends outside to help you . . just say what you want and we will do it, whether it's pickets or MPs.'
Mr Daly was a Special Branch informer on Irish terrorists in Bristol for 15 years and an MI5 mole in Galway, the court has been told.
He is giving evidence in the trial of Martin McMonagle and Liam Heffernan, who are accused of plotting a bombing campaign and conspiring to steal explosives for the campaign from a Somerset quarry.
Mr McMonagle, from Limerick, and Mr Heffernan, from Belfast - both 31 - have denied conspiracy. It is alleged Mr Daly was recruited by the Irish National Liberation Army to help an active service unit - including Mr McMonagle and Mr Heffernan - steal the explosives, but that he was, in fact, an MI5 agent.
To maintain his cover and protect his life, Mr Daly told the court he had played a prominent role in republican groups.
On one occasion he made a platform speech at a major rally against the Prevention of Terrorism Act.
He had taken part in fund- raising for the wives and children of terrorist prisoners.
Mr McMonagle's counsel, Rock Tansey QC, suggested that Mr Daly - who gave evidence from behind a large brown paper screen to protect his identity - lied with amazing ease.
Mr Daly replied: 'It is part of my cover. I was in danger and possibly could have been shot. I was hardly going to say I was working as a police agent, was I?'
He told the court he had not even told his wife of his double life until they moved back to Ireland in the late 1980s.
The trial was adjourned until Monday.