Official reportedly prevented from taking up embassy post after Israel refuses to commit itself not to misuse British passports

Britain has refused to allow Israel's Mossad secret service to send a representative back to the country's London embassy following the row over the killing of a Hamas operative by agents using forged UK passports.

Israel's Yediot Aharonot newspaper reported yesterday that the Foreign Office is digging in its heels because Israel is refusing to commit itself not to misuse British passports in future clandestine operations.

Neither Britain nor Israel gave any details of the embassy official who was ordered to leave the country in March after an investigation by the Serious Organised Crime Agency showed that the Mossad was behind the passport theft.

But the official was understood to be an intelligence officer who was known to the UK authorities and worked as official liaison with Britain's MI6. There was no suggestion the officer was personally involved in the passports affair.

Israel has never admitted any role in February's Dubai assassination of Mahmoud al-Mabhouh, who was described as a key figure in smuggling Iranian weapons into the Gaza Strip on behalf of the Palestinian Islamist movement. It has abstained from signing any material that might be construed as a confession.

Britain had made clear in public statements and private meetings with the Israelis that it expected formal guarantees that there would be no repeat of the passport cloning. The real documents belonged to Britons living in Israel.

Forged or stolen Irish, Australian, French and German passports were also used by the hit squad, whose operation – including the use of elaborate disguises – was extensively recorded by CCTV cameras in the emirate.

Israel conspicuously refrained from retaliating for the expulsion of the Mossad officer, apparently accepting that it was no more than a slap on the wrist before a return to business as usual.

The Mossad and MI6 are known to have a close working relationship especially over terrorism – despite political differences over the peace process, settlements and the Palestinians between the UK and Israeli governments. Iran's nuclear programme is likely to be another high-priority issue of common concern.

Yediot reported that Israeli security officials were concerned about the breakdown in relations between the two agencies. "It is estimated that the affair will only be resolved, if at all, after this week's UK general elections," the paper said.

The Foreign Office said it had not been approached by the Israelis about a replacement for the expelled official. "However we look to Israel to rebuild the trust we believe is required for the full and open relationship we would like," said a spokesman. "We have asked for specific assurances from Israel, which would clearly be a positive step towards rebuilding that trust. Any Israeli request for the diplomat to be replaced would be considered against the context of these UK requests."