Washington and the Palestinians want work on the barrier halted, but Israeli Prime Minister Ariel Sharon has vowed to continue construction of the fence.
"We've made clear to the Israelis in public and private settings that the fence is a concern. And we've had many conversations at a variety of levels, including the highest levels, about the fence," National Security Council spokesman Michael Anton told the Los Angeles Times.
The New York Times reported that the Bush administration was acting in response to complaints from the Palestinians, who say the fence has cut them off from homes, farms and workplaces.
On a deeper level, the Palestinians do not want the fence to become the de facto border between the two peoples. The 370-mile fence is intended to separate Israel from the West Bank, and at some points dips deep into the West Bank to protect Jewish settlements.
At issue is $9 billion in loan guarantees recently approved by Congress. The Los Angeles Times said the administration was considering reducing the guarantees in proportion to the amount of money Israel is spending on the fence on Jewish settlements.