Iraqi politician Ahmed Chalabi has denied reports he warned Iran that US spies had cracked its secret codes.
Iran has denied using Mr Chalabi as an intelligence source
Sources in Washington have indicated an investigation is under way to check if US agents may have revealed the information to the politician.
Mr Chalabi - who was backed by the US administration until recently - described the reports as "stupid from every aspect".
Iran has denied the reports, which Mr Chalabi's allies suggest are a smear campaign ahead of the Iraq handover.
"Where would I get this from?" Mr Chalabi asked in an interview for AP news agency which he gave during a visit to the Iraqi city of Najaf.
"I have no such information."
As US officials confirmed that an FBI investigation was under way, the New York Times reported that civilian Pentagon employees were being tested with lie detectors.
"It's my understanding they're looking into every aspect of how it occurred, who is responsible and what the implications are," said Senator Mark Dayton, after a hearing on the issue.
If the story is true, he said, it would be "a major, major, very major breach of security".
According to US media reports, Mr Chalabi told Iran's chief spy in Baghdad in April that the US was reading the Iranian intelligence service's communications traffic.
US intelligence is said to have discovered the alleged betrayal when it read a cable which the Iranian station chief had sent to his superiors in Iran detailing the conversation with Mr Chalabi.
Richard Perle, a former Pentagon adviser and one of Mr Chalabi's strongest backers, told AP he thought the idea that Iran's top spy in Iraq would use a compromised communications channel was inconceivable.
"The idea that the Iranians, having been informed that
their codes were broken, would then use their broken codes back to Iran is absurd," he said.
Iran has had public contacts with Mr Chalabi, who like most Iranians is a Shia Muslim, but denies reports of any leak.
"Iran had no special intelligence contacts or activities with Chalabi and we don't have now," said Supreme National Security Council Secretary Hassan Rowhani.
Correspondents note that news of the leak broke after the Bush administration cut funding for Mr Chalabi's Iraqi National
Congress group, citing concerns about the value of intelligence it had supplied.