The National Catholic Reporter reports that the US Bishops are also investigating the book.
The book questions the uniqueness of Christ and the Church. These issues were also behind other high-profile censures of theologians.
The authorities are worried that the theologians appear to be teaching that Christ is analogous to other religious figures such as the Buddha. They also see that Christianity is being presented as one valid spiritual path among others.
The case confirms that religious relativism is of particular concern to authorities.
Critics of writers such as Phan believe his work creates confusion on these points. And his defenders say Church authorities are drawing the borders of theological discussion too narrowly.
Phan is a priest of the Dallas diocese. He is also a former president of the Catholic Theological Society of America. The book in question is his 2004 Orbis publication Being Religious Interreligiously.
It's believed Phan received a letter from the Congregation of the Faith as far back as July 2005. The letter said the book is in tension with the 2000 Vatican document Dominus Iesus. That document states that non-Christians are "in a gravely deficient situation".
The congregation asked Phan to write an article correcting the problems, and to instruct Orbis not to reprint his book. Phan wrote back in April 2006 offering to comply under certain conditions. He is yet to receive a response.
Last May, Bishop William Lori also wrote to Phan. Lori is chair of the US Bishops Committee on Doctrine.
Breaking News: Vatican, bishops investigating Georgetown theologian Phan (NCR Cafe, 12/9/07)
LINKS (not necessarily endorsed by Church Resources)
Peter C Phan, Ellacuria Chair of Catholic Social Thought, Georgetown University