Turkey denied Thursday a US newspaper report claiming it had blown an Israeli spy ring working with Iranians on its soil to the authorities in Tehran, a sign of the strained ties between the once close allies.

Washington Post columnist David Ignatius said Prime Minister Recep Tayyip Erdogan's government had last year revealed to Iranian intelligence the identities of up to 10 Iranians who had been meeting in Turkey with Mossad handlers.

But Turkish Foreign Minister Ahmet Davutoglu said the allegations were "without any foundation".

"(Turkish intelligence chief Hakan) Fidan and other security agents report only to the Turkish government and the parliament," he said.

Davutoglu said it was a "slanderous" report targeting Turkey's "respectability" and highlighted the "excellent" work of Fidan, who is a key advisor to Erdogan.

The Washington Post report said the Turkish action had been described by "knowledgeable sources" as a "significant" loss of intelligence and "an effort to slap the Israelis".

Relations between Israel and Turkey, once its closest Muslim ally, have deteriorated dramatically since an Israeli raid on a flotilla of aid bound for Gaza in 2010 that left nine Turks dead.

Israeli Prime Minister Benjamin Netanyahu eventually issued a US-brokered apology to Turkey in March this year over the raid but ties remain tense.

"Israeli anger at the deliberate compromise of its agents may help explain why Prime Minister Benjamin Netanyahu became so entrenched in his refusal to apologise to Erdogan about the May 2010 Gaza flotilla incident," the Washington Post said.

Erdogan, head of an Islamist-rooted government in Turkey for over a decade, stoked US anger in August when it accused Israel of being behind the ouster of Egypt's Islamist president Mohamed Morsi.

The Washington Post also said that Fidan was "suspect" in Israel because of what are seen as friendly links with the Jewish state's archfoe Tehran.

NATO-member Turkey shares a border with Iran and the Washington Post said its intelligence services conduct "aggressive surveillance" inside its borders so it had the resources to monitor covert Iranian-Israeli meetings.