The scientist - named by US television as Wang Ho Lee - worked in the Los Alamos National Laboratory in New Mexico, which is at the centre of the country's nuclear weapons development.

Eileen Wheelan: Scientist under suspicion for some time

"We don't know the extent of the full damage. It is serious, but the FBI and our law enforcement people at Los Alamos are pursuing this vigorously," Energy Secretary Bill Richardson said.

The US believes that the scientist - an American of Chinese origin - passed on information to China during the 1980s on how to make smaller nuclear warheads.

US intelligence officials believe it could be the most serious spying case in a generation, saving China about 15 years of its own research.

'Unfounded rumours'

Chinese foreign ministry spokesman Zhu Bangzao said Beijing was following the case closely.

"What I will point out emphatically is that the US media has disseminated many rumours about China stealing US missile technology, and all these are unfounded," Mr Zhu said.

He blamed such rumours on people who wanted to hamper the development of relations between China and the US.

Gerald Segal of the International Institute for Strategic Studies: US knew of spying for years

The Taiwan-born scientist recently failed a lie detector test as part of a three-year investigation into the alleged disclosure of sensitive nuclear missile technology to China in the mid-1980s.

Initially the suspect was moved from working on classified material to a less sensitive post. He then had his security clearance suspended, before being fired.

He has not been arrested or charged.

'Saved research time'

US intelligence believes China received documents which allowed it to develop miniature nuclear devices to be used in multiple warhead missiles.

The information is thought to have saved China 15 years of research effort.

Chinese nuclear technology lagged a generation behind the US until the mid-1990s, according to some reports. Since then, Chinese weapons have shown similarities to the latest US equivalents.

Cover-up claimed

The timing of the action has been questioned as it comes hard on the heels of a story in Sunday's New York Times that China obtained secrets some years ago.

Republican senators have also stepped up the pressure recently, with accusations that the Clinton administration knew about the leak three years ago and was slow to respond for fear of harming relations with Beijing.