Israel's internal security service, known as Shin Bet, said Wednesday that it seized three suspects three weeks ago when the plot was in "advanced planning stages."
But it said it was still hunting the key operative in the plot in which suicide bombers were to simultaneously attack the U.S. Embassy and Israel's main convention center in Jerusalem, an al-Qaida trademark.
Shin Bet announced on Wednesday the plot had been foiled, although the U.S. State Department said then it was not able to corroborate the Israeli report.
The developments came amid growing concern in Israel about what has been called a "jihadist tsunami" building up around the Jewish state for the first time as groups linked to al-Qaida emerge in war-torn Syria and Lebanon , Egypt's Sinai Peninsula and in the Palestinian West Bank and Gaza.
"The Israeli intelligence community expects that ... jihadist attacks originating from Syria, Egypt and Lebanon will increase significantly in the coming years," Oxford Analytica observed on Tuesday.
"There is concern that these militants may evolve capabilities to carry out more sophisticated and deadly attacks inside Israeli territory on a similar scale to the August 2011in southern Israel, using multiple operatives, suicide bombers and even anti-aircraft rockets."
Eight Israelis were killed then in an attack that involved multiple strike groups operating in the southern Sinai near the Israeli resort city of Eilat on the Gulf of Aqaba.
There has been rising instability and an escalation in jihadist activity on three of Israel's four borders since the political turmoil of pro-democracy uprisings in several Arab states, including Egypt and Syria, in early 2011.
This has culminated in a sharp increase in cross-border attacks on Israeli targets since September.
These have largely centered on Gaza, on Israel's southern border, which is ruled by the fundamentalist Hamas and harbors hard-line militants who frequently fire short-range rockets into Israel.
These have escalated since mid-December, prompting Israeli Prime Minister Binyamin Netanyahu to warn Hamas Tuesday that Israel will "respond forcefully" if the attacks continue.
Israel has twice mounted major military operations against Gaza in recent years, Operation Cast Lead from Dec. 27, 2008, to Jan. 18, 2009; and Operation Pillar of Defense Nov. 14-21, 2012. Some 1,500 Palestinians were killed in the two operations.
"If Hamas and the terror organizations have forgotten this lesson, they will learn it again powerfully very soon," Netanyahu declared.
Some observers speculated that the disclosure of the U.S. Embassy plot may have been timed to bolster Israeli justification for a new assault on the Gaza Strip, which has been a thorn in Israel's side since it unilaterally withdrew from the territory in 2005, 38 years after conquering it in the 1967 Mideast war.
However, there's no mistaking the unease among Israeli security officials about the jihadist threat, which appears to be far more dangerous than the small-scale attacks from Gaza.
Western intelligence officials say Israeli concern has been heightened by a lack of solid intelligence on the jihadist groups and the country's inability to use its military might to deter these organizations, which often have no fixed bases, as it has done against the region's regimes over the years.
But the intelligence service of the Palestinian Authority in the West Bank, much of which is still ruled directly by Israel, recently warned of increased activity in the territory, conquered in 1967, by jihadist organizations building cell networks there.
The details of the planned multiple suicide bombings released by Shin Bet were highly detailed, down to the attackers, mostly Palestinians in three cells, being joined by a five-man team who would fly into Israel with phony Russian passports. They would carry out the U.S. Embassy attack.
Shin Bet said the plot was personally ordered by al-Qaida chief Ayman al-Zawahiri.
Avig Oreg, a former head of Israel's Military Intelligence, said the plot marked the first time al-Qaida had been directly linked to an attempted attack on the Jewish state.