Senior officials in the US Defense Department have confirmed reports that the Pentagon ran a secret unit to help gather human intelligence.
Rumsfeld wants improved intelligence
The Washington Post first revealed on Sunday that the Strategic Support Branch (SSB) was set up on the orders of Defence Secretary Donald Rumsfeld.
The Pentagon was re-interpreting US law and trying to bypass the CIA, it said.
But the department denies bending laws, saying the group was set up to provide better support for military forces.
It was in regular touch with the CIA and Congress over its plans, officials say.
The Post said Pentagon documents and sources said the SSB was designed to counter the "near total dependence" on the CIA for human intelligence.
It reported that the unit had come into being in 2002, following the attacks of 11 September 2001.
It ran small teams in Iraq, Afghanistan and other countries, which gathered battlefield intelligence for special operations units, recruited spies and reconnoitred potential targets, the Post said.
The newspaper said the units were subject to fewer legal constraints than previous intelligence-gathering units.
CNN cited a senior defence official as saying the SSB had been designed "to have as much flexibility as possible".
Pentagon spokesman Lawrence DiRita issued a statement on Sunday saying: "There is no unit that is directly reportable to the secretary of defence for clandestine operations as is described in the Washington Post article...
"Further, the department is not attempting to 'bend' statutes to fit desired activities, as is suggested in this article."
But the statement went on to say: "It is accurate and should not be surprising that the Department of Defense is attempting to improve its long-standing human intelligence capability."
However, the BBC's Nick Childs at the Pentagon says there have inevitably been frictions and turf battles between different departments as the US intelligence community has tried to get to grips with the failings of recent years.
Donald Rumsfeld is known to have a special interest in getting better intelligence for US forces, he says.
Senior Republican Senator John McCain said he would bring the matter before the Senate Armed Services Committee.
Mr McCain said the setting up of the alleged unit appeared to have been "a product of the frustration with the CIA of a failure to have decent human intelligence".