A final decision has not been made, the official said. The administration is trying to tamp down damage from the months-long spying scandal - including the most recent disclosure that the National Security Agency monitored the communications of German Chancellor Angela Merkel.
President Barack Obama said the U.S. government is conducting "a complete review of how our intelligence operates outside the country." Interviewed on the new television network Fusion on Monday, Obama declined to say when he learned about the spying operations.
"What we've seen over the last several years is their capacities continue to develop and expand, and that's why I'm initiating now a review to make sure that what they're able to do doesn't necessarily mean what they should be doing," Obama said.
Sen. Dianne Feinstein, chairwoman of the Senate Intelligence Committee, called for a "total review of all intelligence programs" following the Merkel allegations. In a statement Monday, the California Democrat said the White House had informed her that "collection on our allies will not continue."
The administration official said that statement was not accurate, but added that some unspecified changes already had been made and more were being considered, including terminating the collection of communications from friendly heads of state.
The official was not authorized to discuss the review by name and insisted on anonymity.
Lawmakers were set to press for more information about surveillance programs at a House Intelligence Committee hearing Tuesday afternoon.
Reports based on new leaks from former NSA systems analyst Edward Snowden indicate that the NSA listened to Merkel and 34 other foreign leaders.
"With respect to NSA collection of intelligence on leaders of U.S. allies - including France, Spain, Mexico and Germany - let me state unequivocally: I am totally opposed," Feinstein said. She added that the U.S. should not be "collecting phone calls or emails of friendly presidents and prime ministers" unless in an emergency with approval of the president.
In response to the revelations, German officials said Monday that the U.S. could lose access to an important law enforcement tool used to track terrorist money flows.
Other longtime allies have also expressed their displeasure about the U.S. spying on their leaders. Spain's prosecutor's office said Tuesday it has opened a preliminary inquiry to determine whether a crime was committed by NSA surveillance.
As possible leverage, German authorities cited last week's non-binding resolution by the European Parliament to suspend a post-9/11 agreement allowing the Americans access to bank transfer data to track the flow of terrorist money. A top German official said Monday she believed the Americans were using the information to gather economic intelligence apart from terrorism and said the agreement, known as the SWIFT agreement, should be suspended.
European Union officials who are in Washington to meet with lawmakers ahead of White House talks said U.S. surveillance of their people could affect negotiations over a U.S.-Europe trade agreement. They said European privacy must be better protected.
Many officials in Germany and other European governments have made clear, however, that they don't favor suspending the U.S.-EU trade talks which began last summer because both sides stand to gain so much through the proposed deal.
Amid tensions with European allies, the top U.S. intelligence official declassified dozens of pages of top-secret documents in an apparent bid to show the NSA was acting legally when it gathered millions of Americans' phone records.
Director of National Intelligence James R. Clapper said he was following the president's direction to make public as much information as possible about how U.S. intelligence agencies spy under the Foreign Intelligence Surveillance Act. Monday's release of documents focused on Section 215 of the Patriot Act, which allows the bulk collection of U.S. phone records.
The document release is part of an administration-wide effort to preserve the NSA's ability to collect bulk data. The administration says the spying is key to tracking terror suspects. Privacy activists say is a breach of the Constitution's ban on unreasonable search and seizure of evidence from innocent Americans.
The documents support administration testimony that the NSA worked to operate within the law and fix errors when they or their systems overreached. One of the documents shows the NSA admitting to the House Intelligence Committee that one of its automated systems picked up too much telephone metadata. The February 2009 document indicates the problem was fixed.
Another set of documents shows the judges of the FISA court seemed satisfied with the NSA's cooperation.
Asked Monday whether the NSA intelligence-gathering had been used not only to protect national security but American economic interests as well, White House spokesman Jay Carney said: "We do not use our intelligence capabilities for that purpose. We use it for security purposes."
National Security Council spokeswoman Caitlin Hayden later clarified that: "We do not use our intelligence capabilities to give U.S. companies an advantage, not ruling out that we are interested in economic information."
Still, Carney acknowledged the tensions with allies over the eavesdropping disclosures and said the White House was "working to allay those concerns," though he refused to discuss any specific reports or provide details of internal White House discussions.