The controversy surrounding the alleged falsification of Australian passports used in the killing of a senior Hamas official worsened on Tuesday as the Australian Foreign Ministry asked Israel to withdraw a diplomat from Canberra over his reported involvement on the issue.

Foreign Minister Stephen Smith said the Israeli diplomat was "involved in state intelligence" and that Australian passports "were deliberately counterfeited and cloned for use'' and it was "beyond doubt'' that Israel was responsible. But Smith refused to identify the Israeli diplomat and added the official was asked to leave Australia within a week.

Investigations conducted by the Australian police and intelligence service found that four Australian passports were used in the killing of Mahmoud al-Mabhouh in Dubai, United Arab Emirates, in January this year. Those involved in the operations also used British, Irish, French, and German documents, investigations showed.

However, Smith clarified that despite the latest diplomatic tension, Israel "remains a firm friend of Israel." He said the genuine friendship must run both ways.

In March, the British government expelled an Israeli diplomat over counterfeited British passports.

Israeli Foreign Ministry spokesman Yigal Palmor said his nation regrets Australia's decision. He described the decision as "not in line with the quality and importance of our relationship"

According to Smith, Australia also regrets the move and "takes this step much more in sorrow than in anger or in retaliation." He made the comment before the Parliament, after the Department of Foreign Affairs and Trade called in Israel's charge d'affaires.

He told lawmakers: "This is not what we expect from a nation with whom we have had such a close, friendly, and supportive relationship. Australia's relationship with Israel has always been founded on a basis of mutual respect and trust. But Israel's actions in this regard have undermined that respect and trust.''