Yemeni President Ali Abdullah Saleh has said the security forces have arrested a group of alleged Islamist militants linked to Israeli intelligence.
Mr Saleh did not say what evidence had been found to show the group's links with Israel, a regional enemy of Yemen.
The arrests were connected with an attack on the US embassy in Sanaa last month which killed at least 18 people, official sources were quoted saying.
Israel's foreign ministry has rejected the accusation as "totally ridiculous".
"A terrorist cell was arrested and will be referred to the judicial authorities for its links with the Israeli intelligence services," Mr Saleh told a gathering at al-Mukalla University in Hadramawt province.
"Details of the trial will be announced later. You will hear about what goes on in the proceedings," he added.
The 17 September attack was the second to target the US embassy since April. Militants detonated car bombs before firing rockets at the heavily fortified building.
Mr Saleh did not identify the suspects, but official sources were quoted saying it was same cell - led by a militant called Abu al-Ghaith al-Yamani - whose arrest was announced a week after the attack.
An Israeli foreign ministry spokesman said the Yemeni president's statement was without foundation.
"To believe that Israel would create Islamist cells in Yemen is really far-fetched. This is yet another victory for the proponents of conspiracy theories," Igal Palmor said in remarks reported by AFP.