Egypt criticised a US decision to freeze $195 million in military aid on Wednesday, as a US delegation including presidential adviser Jared Kushner visited Cairo for meetings on the Middle East peace process.
The decision to withhold some financial and military aid in response to Egypt's poor record on democracy and civil liberties came as a surprise, after President Donald Trump pledged strong tries with the key US ally after they had deteriorated under his predecessor Barack Obama.
The US delegation met Egyptian Foreign Minister Sameh Shoukry on Wednesday, his spokesman said, after the meeting had earlier been dropped with no explanation from the minister's schedule sent to reporters.
President Abdel Fattah al-Sisi also met with the delegation, his spokesman Alaa Youssef told AFP.
The presidency and foreign ministry, in statements after the meetings, said the talks focused on efforts to boost bilateral ties and reviving Israeli-Palestinian peace talks, without mention of the aid cuts.
But the foreign ministry said earlier that Cairo "regrets the decision" to reduce some funds allocated under a US assistance program and withhold the disbursement of other military aid.
The US State Department confirmed that it had denied Egypt $96 million in aid and delayed $195 million in military funding because of concerns over its human rights record.
"It's about human rights," spokeswoman Heather Nauert told reporters in Washington.
"We're committed to strengthening our bilateral relationship with Egypt, but we have decided that in the interest of the United States it's in our best interest to exercise a national security waiver.
"The funds that would normally go to Egypt, or were set to go to Egypt, will be held in reserve until we can see -- and this is why we're doing this, until we can see progress on democracy."
The Egyptian foreign ministry, however, warned that the move "may have negative repercussions."
"Egypt considers this step as a misjudgement of the nature of the strategic relations that binds the two countries over decades," it added.
Trump's arrival in office in January saw an improvement in relations with Egypt after Obama's cold shoulder to Sisi over rights issues.
Obama temporarily suspended military aid to Egypt after the July 2013 overthrow of Islamist president Mohamed Morsi and the subsequent bloody crackdown on Morsi's supporters.
Sisi in May ratified the NGO law, which critics say will severely restrict the work of civil society, including by banning studies without prior permission from the state, with large fines for violations.
Trump set aside criticism of Sisi's rights record while pledging to maintain support for the key US ally, which receives an annual $1.3 billion in military aid.
Egyptian authorities have been fighting an insurgency in the north of the Sinai Peninsula, where an Islamic State jihadist group affiliate has killed hundreds of soldiers and policemen.
The Pentagon is also keen to prevent jihadists from crossing Libya's porous border with Egypt.