Possibly there were other programs that did as well prior to that.
But Prowrite did it and had a red squiggly line under incorrect words.
https://www.atarimagazines.com/compute/issue123/P215_1_REVIE...
It does have a real time spell checker. But it doesn't seem to have the squiggly line. The screen blinks at you when you type a word it can't find.
I've just run Prowrite 2 and 3.1.1 via FS-UAE.
So my memory is wrong about that feature have a red squiggly line.
It did have realtime checking. Also Prowrite was WYSIWYG. The realtime checking is neat, but it's actually a bit annoying with the blink. The red squiggly line is a better way to show that there is an unrecognised word.
Thanks for getting me to check.
I'm going to run it and have a look in a bit and get back to you.
It looks like 1st Word on the Atari ST also have a continuous spell checker.
https://en.wikipedia.org/wiki/1st_Word
From the link for 1st Word :
"Among the many new features was a spell checker with a 40,000 word dictionary, although lacking many American English terms,[11] a mail merge program, footnotes and semi-automated hyphenation.[12] The spell checker included the relatively rare, for the time, option to check on-the-fly. It also added document statistics display, including the number of characters, pages, etc"
Honestly I'd guess it's one of those things that possibly originated at Xerox Parc and then got added to consumer products from the 1980s onwards.
Personally, I remember it because I remember seeing Word 6 and thinking 'at last they have caught up to Prowrite'.
With the exception of the somewhat wobbly cheap keyboard, that was the best and most distraction-free setup I have ever seen for WYSIWYG word processing (sadly never tried the Xerox workstations).