"We have no involvement in these allegations," a spokesman for Prime Minister Ariel Sharon's office told AFP.

"It is an internal issue in the United States which is running out of steam anyway.

"Israel has not used an agent to spy on the United States, the country which is its best ally."

US authorities have confirmed that they are investigating an aide to a senior Pentagon official who allegedly passed secrets to Israel with the help of employees of a powerful pro-Israel lobby.

The Federal Bureau of Investigation believes the man passed classified White House policy documents on Iran to Israel and received no money, but acted out of ideological support for the Jewish state, said a top US official who spoke on condition of anonymity.

The probe targets an individual in the office of Undersecretary of Defense for Policy Douglas Feith, the third most senior official at the Pentagon.

The Washington Post on Saturday identified the man as one Larry Franklin, described as a desk officer in the Pentagon's Near East and South Asia Bureau.

Ehud Yatom, an MP for Sharon's Likud party and a member of the parliamentary sub-committee which scrutinises the activities of the security services, rejected any involvement by Franklin.

"I have never heard any talk about him and Israel has no need for recourse to such agents," he told public radio Sunday.

Itamar Rabinowitch, a former Israeli ambassador to Washington, linked the allegations to the upcoming US presidential elections and a row among members of the Bush administration over the war in Iraq.

"There are some people in the United States, particularly anti-semitic politicians, who believe that the war in Iraq was launched to serve the interests of Israel," he told army radio.