Parc Aberporth has received support from the Welsh Assembly Government
An Israeli firm whose unmanned aerial vehicles were used in the recent Gaza conflict will have a new version tested for UK forces at a technology park in Ceredigion.
Amnesty International has concerns and MP Mark Williams has tabled Commons questions about the industry.
The Welsh Assembly Government, which has supported Parc Aberporth, said it would not knowingly invest in any project that could be used in any human rights abuse.
Elbit Systems Ltd said the drones used by Israel did not have engines made in the UK.
Elbit is one of Israel's largest defence companies and, along with the defence company Thales UK, has been awarded an £800m contract for the development of specialised surveillance systems for Britain's armed forces.
The new defence system is known as Watchkeeper and the backbone of the system will be a new drone known as the WK450.
That is based on the Hermes 450 manufactured by Elbit and was used extensively by the Israeli armed forces, including recent operations in Gaza. Elbit has its own version of the WK450 known as the Hermes 450B.
Unmanned aerial vehicles are used for both civilian and military purposes
The Welsh Assembly Government has supported the development of Aberporth as one of the leading testing areas for unmanned aerial vehicles (UAVs) in Europe.
Taro Naw, the BBC's Welsh language current affairs programme on S4C, asked the assembly government if it was concerned that the company's involvement could directly or indirectly benefit the Israeli armed forces.
An assembly government spokesman told the programme that it "wouldn't knowingly invest in any project that could be used in any form of human rights abuse".
It also said it had "support mechanisms" which helped to ensure that such standards were complied with.
Elbit's Hermes 450 caused controversy earlier this year when Amnesty International raised questions about their possible use of British engines produced by UAV Engines of Litchfield, one of Elbit's subsidiary companies.
Amnesty said it could not source any other company which produced these engines for the Hermes 450, but the Israeli government said the British engines were not used in Israel.
This would breach export agreements. Israel insists that the British engines are for Hermes 450s which are exported from Israel.
Concern about possible British involvement was heightened by the unexpected admission by the UK government's Department of Business that it could no longer be certain that UK engines were not being used because it did not monitor what happened to them once they arrived in Israel.
Amnesty has called for that monitoring to take place.
In a statement Elbit said: "Hermes 450 used by the IDF (Israeli Defence Force) does not have UK engines.
"The UK engines are used in Hermes 450 serving the British army and other international customers".
The Hermes 450 was shown at Aberporth in 2005. The assembly government confirmed that the Hermes 450 has not been tested at Aberporth.
Ceredigion Liberal Democrat MP Mark Williams has tabled questions in the House of Commons about the UAV industry in the UK and any possible link with the the Israeli military.
Mr Williams said: "The Ministry of Defence has a long history of association with Aberporth and most of my constituents are not concerned about the civilian uses [of UAVs] but there are broader concerns".
Many people at Aberporth welcome the development of the park and its potential to create up to 250 jobs.
Taro Naw is on S4C at 2025 GMT on Tuesday, 17 March.