The ship set sail from Greece on Saturday, carrying 2,000 tonnes of humanitarian aid for the Gaza Strip, but the Israeli foreign ministry said that it had reached an agreement with Greece and Moldova to have the ship diverted to Egypt.
Israeli authorities also reportedly contacted Omar Suleiman, the Egyptian intelligence chief, to request that the ship be allowed to dock in El-Arish, close to the border with the Gaza Strip.
But Hossam Zaki, a spokesman for the Egyptian foreign ministry, said that he was not expecting the ship to travel to the Egyptian port.
"This ship is not headed Egypt. We did not get any official request from the Libyan side for the ship to dock in Egypt," he said.
"Its not about the Israelis' request. Its up to the will of the organisers of the ship.
"They said they are heading to Gaza, they did not approach us. The situation as far we are concerned is a ship heading to Gaza."
The boat was chartered by a charity headed by the son of Muammar Gaddafi, the Libyan leader, and is carrying "a number of supporters who are keen on expressing solidarity with the Palestinian people in the plight amidst the siege imposed on Gaza".
'Very serious consequences'
The 92-metre ship, renamed Al-Amal which means "Hope" in Arabic, has a 12-man crew and is carrying at least nine passengers, a representative of Piraeus-based agents Alpha Shipping said.
The passengers were made up of six Libyans, a Moroccan, a Nigerian and an Algerian.
|The Moldova-flagged cargo ship is carrying 2,000 tons of humanitarian aid for Gaza [AFP]
"Israel will not let the boat reach Gaza," Yossi Peled, an Israeli cabinet minister, said on Sunday.
Allowing boats to reach the Hamas-run Gaza Strip without being checked would have "very serious consequences" for Israel's security, he said.
The latest attempt to defy the Israeli blockade comes after the killings in May of eight Turks and a dual US-Turkish citizen when Israeli armed forces attacked a flotilla heading for Gaza.
Amid increasing international condemnation after the raid, Israel has begun easing the blockade on the Gaza Strip by allowing in some previously banned items, but still maintains a naval blockade, prevents the export of goods or people over land, and controls the territory's airspace.
Construction materials to repair extensive infrastructure damage suffered during Israel's war in Gaza in December 2008-January 2009 are also heavily restricted.