Egypt is considering the release of alleged Israeli spy Ilan Grapel, AFP reported on Saturday, citing Egypt's MENA news agency.

MENA reported that the U.S. has offered Egypt political and economic incentives for Grapel's release.

MENA also reported that Grapel's parents, as well as a U.S. diplomat, were permitted to visit Grapel on Saturday.

Grapel, who holds dual U.S. and Israeli citizenship, was arrested in Cairo in June.

He was accused of sedition and inciting Egyptians to clash with the country's interim military leadership.

Israel has denied the 27-year-old Grapel was a spy.

Grapel's family says he was spending the summer in Cairo as an intern at a legal aid group. Grapel is a law student at Emory University in Georgia.

Grapel, whose father is Israeli, grew up in the U.S. After college, Grapel moved to Israel and joined the IDF, serving as a paratrooper. He was wounded during the Second Lebanon War in 2006.