Charges could be brought in the case as early as next week, said two federal law enforcement officials speaking on condition of anonymity because the investigation is ongoing. The case has taken so long in part because of diplomatic sensitivities between the United States and its close ally Israel, they said.

Although the information involved — material describing Bush administration policy toward Iran — was described as highly classified, prosecutors could determine that the crime involved falls short of espionage and could result in lesser but still serious charges of mishandling classified documents, the officials said.

They said the still-classified material did not detail U.S. military or intelligence operations and was not the type that would endanger the lives of U.S. spies overseas or betray sensitive methods of intelligence collection.

The target of the probe was identified by the two officials as Larry Franklin, a senior analyst in a Pentagon office dealing with Middle East affairs. Franklin, who did not respond to a telephone message left at his office Saturday, formerly worked for the Defense Intelligence Agency.

Efforts to find a home telephone number were unsuccessful.

In a statement late Friday, the Defense Department, without saying he was under investigation, described Franklin as being at the "desk officer level, who was not in a position to have significant influence over U.S. policy. Nor could a foreign power be in a position to influence U.S. policy through this individual."

Franklin works in an office overseen by Douglas J. Feith, the defense undersecretary for policy. Feith is an influential aide to Defense Secretary Donald Rumsfeld whose previous work included prewar intelligence on Iraq (news - web sites), including purported ties between Saddam Hussein (news - web sites)'s regime and al-Qaida terrorism network.

In August 2003, Franklin and a Pentagon colleague were in the news after it was disclosed they had met two years earlier with Manuchar Ghorbanifar, who was among the Iranians who suggested to the Reagan administration in the 1980s that profits from arms-for-hostages deals be funneled into covert arms shipments to U.S.-backed Contra rebels battling the leftist Nicaraguan government.

The investigation centers on whether Franklin passed classified U.S. material on Iran to the American Israel Public Affairs Committee, the highly influential main Israeli lobbying organization in Washington, and whether that group in turn passed them on to Israel. Both AIPAC and Israel deny the allegations.

The U.S. law enforcement officials stressed that the investigation is not yet complete and it remained possible that others could be implicated. They would not comment on whether that might include officials at AIPAC, which said it has been cooperating in the investigation.

"Any allegation of criminal conduct by AIPAC or its employees is false and baseless," AIPAC said in a statement.

In Israel, Prime Minister Ariel Sharon (news - web sites) issued a statement Saturday saying that Israel has no connection to the matter. Israeli officials say their government halted all espionage activities in the United States after the 1985 arrest of Navy analyst Jonathan Pollard on charges of passing secrets to Israel.

"Israel does not engage in intelligence activities in the U.S. We deny all these reports," the statement said.

The investigation is being handled by U.S. Attorney Paul McNulty, whose Virginia district includes the Pentagon and whose office regularly deals with classified material, terrorism and other sensitive matters. The FBI's counterintelligence division and counterespionage prosecutors at the main Justice Department (news - web sites) in Washington are also involved in the case.

The law enforcement officials said that until the past few weeks, the investigation has been kept under tight wraps and included use of sophisticated electronic surveillance techniques they would not further describe. They also would not say whether such surveillance was conducted inside the Pentagon itself, although it has involved at least one computer of Franklin's, they said.

The United States has strongly backed Israeli efforts to block nuclear development in Iran, with President Bush (news - web sites) including Iran with Iraq and North Korea (news - web sites) as part of an international "axis of evil."

Yet his administration has battled internally over how hard a line to take toward Iran. The State Department generally has advocated more moderate positions, while more conservative officials in the Defense Department and some at the White House's National Security Council have advocated tougher policies.

Sharon's government has pushed the Bush administration toward more toughness against Iran.

Israel in recent months has repeated expressed concerns about Iran's nuclear ambitions, with some senior officials accusing Iran of developing nuclear weapons in violation of promises made to the United Nations (news - web sites). Last week, Iran threatened to destroy Israel's Dimona nuclear reactor if Israel attacks Iran's nuclear facilities.