An FBI investigation into alleged Israeli spying in the US will damage relations between to the two countries even if the suspicions prove false, according to Israeli officials.
Israel has strenuously denied any link to a claim that a Pentagon analyst fed them classified documents on Iran via a powerful pro-Israel lobby group.
The claim comes at a sensitive time as Israel counts on Washington for backing over its unilateral plan to withdraw from most of the Gaza Strip.
"Even if this is nonsense, it could still harm relations because of the damage in public opinion," said a senior Foreign Ministry official. "It will be very difficult to correct it."
Officials insist that Israel has not spied on the United States since being caught two decades ago in a scandal involving US Navy analyst Jonathan Pollard.
The powerful American Israel Public Affairs Committee also denied serving as a conduit for documents from the analyst connected to Defence Secretary Mr Donald Rumsfeld's office.
The spy suspect is thought to have been in a position to influence Bush administration policy on Iran and Iraq - through his links to Mr Rumsfeld's deputy, Mr Paul Wolfowitz.
However the US media reported a Justice Department spokesman saying the suspect is a desk officer "who was not in a position to have significant influence over US policy".
CBS News, which first reported the story last week, said one of the documents passed to Israel was a draft presidential directive on US policy toward Iran - placed by Mr Bush in his "axis of evil" along with Iraq and North Korea.