Several American citizens have taken shelter in the U.S. Embassy in Cairo amid a sharpening dispute between Washington and Egypt's military-led authorities over U.S.-funded pro-democracy groups in the country, the State Department said on Monday.

"We can confirm that a handful of U.S. citizens have opted to stay in the embassy compound in Cairo while waiting for permission to depart Egypt," State Department spokeswoman Kate Starr said.

According to The New York Times, colleagues confirmed at least two American citizens were being protected at the embassy from potential arrest.

The unusual step of offering U.S. citizens diplomatic refuge follows Cairo's crackdown on non-governmental organizations, including several funded by the U.S. government, which saw travel bans imposed on six American staffers including a son of U.S. Transportation Secretary Ray LaHood.

State Department officials said they did not believe the Americans were in any physical danger, but said they had "concerns given the fact that they want to leave the country and were disallowed."

"There is no expectation any of these individuals are seeking to avoid any kind of judicial process," State Department spokesperson Victoria Nuland said. "Our view is that these people ought to be able to travel freely, that we need to expedite the process of whatever kind of formal registration is ultimately going to be allowed for them, if their property needs to be returned, and that it is in the interest of Egypt's democratic transition not only for international democracy NGOs to be able to operate but for Egyptian democracy NGOs to be able to operate, and that they have already played a strong role in supporting the good elections that have already taken place, and there are more elections coming up."

Raids and crackdown
Egyptian police first raided the groups in late December as part of an investigation into foreign funding of 17 pro-democracy and human rights groups, part of what civil society groups say has been a broader crackdown on critics of the army's heavy-handed tactics in dealing with street unrest.

Washington has strongly criticized the Egyptian move, which has cast a pall over U.S.-Egypt relations as the most populous Arab nation reaches a critical stage in its uncertain transition away from authoritarian rule.

Leading U.S. lawmakers have also voiced outrage over the incident, and American officials have repeatedly warned that Washington may have to take a fresh look at U.S. aid to Egypt's military, which now runs about $1.3 billion per year.

The six U.S. citizens hit with travel bans work with the National Democratic Institute and International Republican Institute. Both receive U.S. public funding and are loosely affiliated with the two major political parties in Washington.

The State Department did not provide details on the Americans sheltering in the embassy, although officials at the NDI said none of their staff had been relocated.

U.S. officials said an Egyptian military delegation was expected in Washington this week for regular talks, which are nevertheless expected to focus in large part on the impasse over the NGOs.

U.S. expresses concern over restrictions
President Barack Obama spoke with the head of Egypt's ruling military council, Field Marshal Hussein Tantawi, on January 20 and stressed the importance of the NGOs, as well as Egypt's request for $3.2 billion in support from the International Monetary Fund.

In a weekend call to Tantawi, U.S. Defense Secretary Leon Panetta urged the Egyptians to take steps to lift the travel ban on Americans wishing to leave the country, and expressed concern over restrictions placed on NGOs, the Pentagon said.

The Obama administration is finalizing its budget for the 2013 fiscal year, which will be presented on February 13 and is expected to include continued assistance for Egypt's military, albeit subject to new conditions imposed by U.S. lawmakers.

Those include evidence that Egyptian military authorities are committed to holding free and fair elections and implementing policies to protect freedom of expression, association, and religion, and due process of law.

Reuters and The Associated Press contributed to this report.