Britain has expelled an Israeli diplomat over the use of fake UK passports by suspected Mossad agents in the assassination of a Hamas commander in Dubai.

Foreign Secretary David Miliband said an investigation had discovered "compelling" evidence that Tel Aviv's secret service was responsible for cloning the ID documents.

He told MPs it was "intolerable" for a foreign country to behave in such a way, and the fact that Israel was a close ally added "insult to injury".

"Given that this was a very sophisticated operation, in which high-quality forgeries were made, the government judges it is highly likely that the forgeries were made by a state intelligence service.

"Taking this together with other inquiries, and the link with Israel established by Soca (the Serious and Organised Crime Agency), we have concluded that there are compelling reasons to believe that Israel was responsible for the misuse of the British passports.

"The government takes this matter extremely seriously. Such misuse of British passports is intolerable."

As a sign of the UK's "deep unhappiness", the Foreign Secretary told MPs: "I have asked that a member of the Embassy of Israel be withdrawn from the UK as a result of this affair and this is taking place."

Mr Miliband said there was no evidence that the 12 British passport holders had been anything other than "wholly innocent victims of identity theft".

He added: "It should not need saying but I must add in the strongest possible terms that the UK had absolutely no advance knowledge of what happened in Dubai nor any involvement whatsoever in the killing."