The US has dismissed allegations by Venezuela's president that the US Drug Enforcement Administration had used its agents to spy on his government.
President Chavez is critical of US foreign policy
US state department spokesman Adam Ereli described the accusations as baseless and without justification.
On Sunday Venezuelan leader Hugo Chavez decided to suspend co-operation with the DEA. Mr Ereli said the move would benefit only the drug traffickers.
The decision marks a further decline in already tense relations with the US.
President Chavez is a regular critic of Washington, which regards Venezuela as a possible source of instability in the region.
Sunday's move comes after Venezuelan prosecutors last month opened an investigation into the activities of the DEA.
The US spokesman said Mr Chavez's accusations were meant to deflect attention from "a steady deterioration" in Venezuela's commitment to fighting drug trafficking in recent months.
"The motivation is an effort to detract from the government's increasingly deficient record of co-operation," Mr Ereli said.
Venezuela is an important transport route for cocaine from neighbouring Colombia, which produces 80% of the world's supply.