Italy's Justice Minister Roberto Castelli has refused to pass on to the United States a request to extradite 22 purported CIA agents.
Abu Omar was allegedly kidnapped from a Milan street
The agents are accused of helping to abduct Muslim cleric Osama Mustafa Hassan, without Italian permission, in Milan in 2003.
The cleric, also known as Abu Omar, was flown to Egypt for interrogation.
An Italian court had issued Europe-wide arrest warrants for the suspects, who are thought to have returned to the US.
Mr Castelli signed the warrants but has now told Milan prosecutors that he had decided against forwarding their extradition request to Washington.
He had previously accused one of the prosecutors involved of being a leftist militant and anti-American.
Milan prosecutor Armando Spataro said he would repeat the extradition request when the new government is formed, following the recent general elections, according to the Associated Press.
Mr Castelli is part of the Silvio Berlusconi centre-right government which was narrowly defeated by the centre-left opposition led by Romano Prodi in the vote on 9-10 April.
Mr Spataro said in a statement that he would "reiterate the extradition request" as he was "convinced it will obtain a different decision from the next justice minister".
Correspondents say the case is one of the best documented alleged cases of the CIA's policy of extraordinary rendition.
The US policy involves seizing suspects and taking them to third countries for questioning without court approval.
The policy has been criticised by human rights groups who say suspects are tortured. They also allege that the CIA has secret prisons where it keeps prisoners without reference to US or international law.
Mr Hassan, 42, is believed to have been abducted on 17 February 2003, and flown out of the country from a US base in Aviano, north of Venice.
He reportedly called his family last year, telling them he had been tortured with electric shocks during his detention.
The CIA has refused to comment on the case and the Italian government has said it had no prior knowledge of any kidnap plot. Mr Hassan is believed to have arrived in Italy in 1997, where he was granted refugee status.