The Dagbladet tabloid claimed the National Security Agency (NSA) had monitored the details of 33 million phone calls made in just one month in Norway, citing information leaked by former NSA analyst turned fugitive Edward Snowden.
Kjell Grandhagen, the chief of Norway's military intelligence service, said the newspaper was mistaken and that the calls were made abroad and monitored by his agency as part of the fight against "international terrorism" and other Norwegian military operations outside the country.
They were then shared with allies including the NSA, Grandhagen said, adding that the newspaper's claims were "incorrect".
Prime Minister Erna Solberg said she thought the newspaper was unwittingly referring to "totally legitimate" phone calls of the same volume collected in Afghanistan.
Disclosures to international media by Snowden, since June have revealed US surveillance on a global scale, straining Washington's ties with key allies.
Revelations of widespread snooping by US secret services have included alleged targets as varied as German Chancellor Angela Merkel's mobile phone, French diplomats' computer networks, the offices of the Brazilian President, and the International Monetary Fund.
The editor-in-chief of Dagbladet, John Arne Markussen, appeared to back down later on Tuesday, telling Norway's public broadcaster NRK the newspaper "could have misunderstood" the information, but did not dismiss the possibility that further evidence could emerge to prove his publication's claims.
But American journalist Glenn Greenwald, who helped Snowden disseminate the top-secret documents to various media organisations, including Dagbladet, said there was no doubt about the NSA's role in Norway.
"The NSA's own documents say this shows collection AGAINST the named country," he wrote on Twitter, promising "more reporting and more docs coming in Norway and very soon".
Dagbladet claimed the calls were monitored between December 10, 2012 and January 8, 2013, but could have extended beyond these dates.
The NSA accusations in Norway centre on so-called "metadata" only, including the identities of callers, their location and the length of the calls.
The US diplomatic mission to Norway refused to comment on the newspaper's claims on Tuesday.