Occupied Jerusalem: A veteran Mossad spy was named to succeed director Meir Dagan on Monday, signalling the Israeli government's confidence in the intelligence service despite fallout from the assassination of a Hamas commander in Dubai.

Nominating Tamir Pardo for a job at the heart of Israel's secret war against Iran, Prime Minister Benjamin Netanyahu's office said he had "decades-worth of rich experience in the Mossad ... and is the right man to usher the organisation through the coming years in the face of complicated challenges".

Pardo will replace Dagan, a hawkish former general who took over the Mossad in 2002 as part of an effort by then-Prime Minister Ariel Sharon to hone a more aggressive secret service.

Dagan was widely seen as responsible for a wave of covert actions including the sabotage of Iranian nuclear projects and assassination of Palestinian and Lebanese fighters, but some Israeli officials criticised his long tenure.

This reached a peak when Dubai accused the Mossad of killing Hamas commander Mahmoud Al Mabhouh at a hotel in the emirate in late January.

Israel has not commented on the charge, but photographs of the alleged Israeli hit team, and of European and Australian passports they were suspected of having forged for the mission, embarrassed the Netanyahu government at an especially touchy point in US-sponsored peacemaking with the Palestinians.

According to a former colleague, Pardo took part with Netanyahu's brother Yonatan in an Israeli commando raid on Uganda's Entebbe airport in 1976. Yonatan Netanyahu died on the mission to free passengers of a hijacked Air France jet.

Pardo served briefly as Dagan's deputy, but quit the Mossad last year. A source briefed on the episode said Pardo, like other Mossad officers of the same generation, had despaired at Dagan's apparent refusal to groom a successor.

"Choosing Pardo means the government wants to keep things 'in the family' for the Mossad and let it know things will go on as before," the source, a former Israeli spy, told Reuters.

"When a secret service messes up, the tendency is to bring in an outsider for the top job, to wage reform. That's how Dagan came in, but it's not how he's leaving," the source said.

Pardo's closest rival for Mossad director was Yuval Diskin, head of the Israeli domestic intelligence service Shin Bet. Dagan had used Diskin as an occasional outside consultant.