Story highlights "Everyone's eyes are wide open," senior U.S. official says

Egypt agrees to return all seized items and to cease raids

Egyptian officials conducted 17 raids on 10 organizations Thursday

One NGO says it does not understand the reasoning behind the raids

Egyptian authorities have agreed to return all the equipment and documents seized during a series of raids this week of nongovernmental organizations (NGOs), the U.S. State Department said Friday.

Egypt's military government told U.S. Ambassador to Egypt Anne Patterson that, in addition to returning everything, the military would end the raids, State Department spokeswoman Victoria Nuland said.

Egypt's leaders said the organizations will be able to return to normal operations and they promised a transparent dialogue to examine the underlying issues behind the raids, she said.

On Friday, in a telephone conversation with Egyptian Field Marshal Mohamed Hussein Tantawi, Defense Secretary Leon Panetta "conveyed his appreciation for Field Marshal Tantawi's prompt decision to halt the raids, and to take steps that will make it easier for NGOs to operate in Egypt," said Pentagon press secretary George Little, in a statement.

A senior U.S. official told CNN that Panetta "conveyed in no uncertain terms his concerns about the attacks on the NGOs" during the 25-minute conversation. The official, who declined to be identified due to the sensitive nature of the discussions, said "everyone's eyes are wide open" on what is going on in Egypt.

Referring to the recent violence that has wracked the country, the official said, "None of this is acceptable," but "some of it has to be expected" given the state of affairs inside the country.

Asked if U.S. aid to Egypt might be cut, the official said that would be a foreign policy decision made by the White House, and not a U.S. military decision.

Egyptian police on Thursday carried out 17 raids on the offices of 10 nongovernmental organizations across the country, but offered no clear explanation.

"We asked them if there was something specific we could help them find," Julie Hughes, Egypt country director for the National Democratic Institute (NDI), told CNN Friday. "They refused to answer."

Two other U.S.-based agencies, Freedom House and the International Republican Institute (IRI), also were raided.

Police took laptops, desktops, video conferencing equipment, cell phones and other electronics, and 15 to 20 boxes of documents, Hughes said.

The actions were part of an investigation into allegations that groups may have received illegal foreign funding and have been operating without licenses from the Foreign Ministry and local ministries, said Adel Saeed, spokesman for the general prosecutor's office.

But the leaders of the U.S.-based organizations were not persuaded. "I don't know that we fully understand what is behind this," Hughes said.

Egypt has been ruled by the military since the ouster of former President Hosni Mubarak in February. It has begun parliamentary elections, with Islamist parties -- particularly the Muslim Brotherhood's Freedom and Justice Party and the Al Noor Salafi Movement -- prevailing in the elections so far.

Representatives of NDI and IRI, which promote democratic institutions, observed Egypt's parliamentary elections. Both groups receive funding from U.S. government agencies and are non-partisan, though they are affiliated loosely with the major American political parties.

"Transitions are hard, and we are hopeful that this is not a sign of things to come," Hughes said.

David Kramer, the president of Freedom House, called the crackdown "an escalation of repression unheard of even during the Mubarak regime."