Kristian Kostov visited Crimea in 2014 when it was annexed by Russia but this was not illegal, Ukraine officials say.
Russia's singer Julia Samoilova was earlier barred from entering Ukraine for performing in Crimea a year later.
That decision outraged Russia, who then decided not to broadcast the show.
Russia annexed Crimea in March 2014 - a move that triggered international condemnation and led to anti-Russian sanctions by the EU, the US and a number of other countries.
On Thursday, Ukraine's border service said it was studying information that Kostov performed in Crimea in June 2014 after footage had emerged apparently showing the Bulgarian singing in the Artek children centre.
"We do not currently have information from our sources or any other law enforcement agencies that he may have visited the occupied peninsula contrary to the legislation of this country," it said.
But border service spokesman Oleh Slobodyan explained that - if media reports were correct - Kostov still would not have broken Ukrainian law.
He said legislation banning foreigners from visiting the annexed territory without permission from Ukraine - or directly from Russia - came into force only in November 2014 - four months after Kostov's alleged visit.
Mr Slobodyan added that Kostov, who at 17 is the youngest competitor, was a minor at the time, anyway. This meant, the official said, that the singer could not have been responsible and had to be accompanied by adults.
Born in Moscow in March 2000, Kostov could pick up a lot of the votes that would have gone to Samoilova, BBC's entertainment reporter Neil Smith in Kiev says.
Kostov's dramatic self-penned ballad is also a stirring enough composition to put him on course to better the fourth-place finish Bulgaria's Poli Genova managed last year, our reporters adds.
As Eurovision fans prepare for Saturday's final in Ukraine's capital Kiev, it looks like the song contest has avoided yet another row - this time over the Bulgarian entrant.