JERUSALEM — The news proved false, but a report last week that Mike Harari, an Israeli mercenary and right-hand man to deposed Panamanian strongman Manuel A. Noriega, was under arrest caused brief anxiety among government officials here.

Harari is a former agent in the Mossad, Israel's intelligence agency, who gained prominence as a figure in business and arms dealings between Israel and Panama, of which he was reported to take hefty commissions. Harari also trained anti-terrorist and private security squads for Noriega.

Israeli diplomats in Panama and American congressmen have warned Israel on several occasions that if Noriega and Washington collided, Harari could prove to be an embarrassment.

Before word arrived that U.S. troops had in fact not detained Harari, officials here had already moved to disown him. Whatever he was doing, he was doing it on his own, they insisted.

"He is a private citizen. As far as I know, he has no connection with the government of Israel," said Yosef Amihud, a spokesman for the Foreign Ministry.

Relatives of Harari say that he is in Israel, Israel Radio reported last week. It is not yet clear whether Harari would face charges in Panama if he were captured.

Harari, 62, is the second prominent Israeli whose tangled relationships with suspected Latin American drug dealers made Israel blush last year. Officials in Colombia accused Yair Klein, a retired army colonel, of training killers on behalf of cocaine smugglers. Klein said he was training cattle ranchers to defend themselves against terrorists.

The Harari and Klein cases had another common thread: Both men evidently traded on skills that have limited marketability in their home country, once their official services ended. There are more than 800 Israeli companies that export anti-terrorist, paramilitary and security training overseas; most are manned by former soldiers and intelligence agents.

Harari's long career with the Mossad included some of the agency's most deadly missions. He headed a force of "hit squads" to kill Palestinian terrorists in Europe. Harari's Mossad career seemed at an end when, in the mid-1970s, one of the hit squads mistook a Moroccan waiter in Norway for an Arab terrorist and shot him dead.

Harari also served as Mossad chief for Mexico and Central America before retiring in the late 1970s. After leaving the Mossad, Harari managed a large insurance firm for a while, published reports here said.