America has been forced to withhold funding from its key ally in the Middle East amid the strain of paying for its expensive military campaign in Iraq.
Washington had promised Israel a substantial increase in its financial support to bolster it against Iran.
But US officials decided to amend their pledge because of escalating costs, including the need to spend $750 million (£375 million) to fly thousands of armoured troop carriers to Iraq to protect troops against Iranian-made roadside bombs.
The Pentagon has come under intense pressure to speed up deployment of the new Mine Resistant Ambush Protected vehicle (MRAP), which boasts a V-shaped hull and a raised chassis and is proven to withstand a range of explosive projectiles common in Iraq.
The army has ordered 8,000 MRAP vehicles at a cost of $12 billion. But a request by the Pentagon for an emergency transport budget illustrates the increasing danger faced by troops on the ground.
Officials said extra funds would be used to get 3,400 MRAPs to Iraq by the end of the year.
The diversion of funds has caused a budget shortfall in Israel that forced Ehud Olmert, the prime minister, to convene an emergency cabinet meeting yesterday.