The Sunday Times of London reported elements in the Pakistani intelligence agency were supporting members of the Taliban and protection its chief, Mullah Omar, in the city of Quetta.
Washington said it might consider an air campaign to take out Mullah Omar and other terrorist leaders who have tried to find sanctuary in the volatile tribal regions in Pakistan.
Baitullah Mehsud, the leader of the Pakistani Taliban, was killed in a U.S. airstrike on a village in South Waziristan on Aug. 5.
Rehman Malik, the Pakistani interior minister, denied the allegations in the Times, saying Omar and bin Laden are in Kandahar, Pakistan's Online International reports.
Malik also downplayed the claims that the Inter-Services Intelligence agency was protecting or providing support to the Taliban.
"The ISI's role in fighting the Taliban had been acknowledged by international intelligence establishments," he said.
He went on to characterize the Times report as an attempt to undermine the Pakistani effort to combat terrorism, saying he may push to limit U.S. airstrikes in the region.