Government spokesman Majdy Rady was quoted by Egypt's Middle East News agency as saying that a cabinet meeting on Tuesday reviewed an Interior Ministry report that "made clear that there is no link between Egyptian chemist Magdy El-Nashar with al-Qaida or the bombings".
The semi-official newspaper al-Ahram quoted a senior security official on Tuesday as saying al-Nashar's innocence was revealed in questioning.
"Through interrogations carried out by Egypt, the British side was assured that El-Nashar has no role in the explosions," the paper quoted the unidentified official as saying.
Meanwhile, Egyptian Foreign Minister Ahmed Aboul Gheit told parliament he would meet the British ambassador in Cairo to discuss the latest developments in al-Nashar's case.
Al-Nashar, who obtained a doctorate degree from Leeds University, was detained last week by Egyptian authorities at the request of the British government, which suspects that he had links to some of the four bombers, three of whom are from Leeds, in the north of England.
Al-Nashar reportedly has denied involvement in the London bombings, and Egyptian security officials have said the country is not prepared to hand him over to Britain.