NEW YORK, Aug 1 (Reuters) - The United States imprisoned and interrogated one or more terrorism suspects at the British Indian Ocean island of Diego Garcia in 2002 and possibly 2003, a former senior U.S. official has told Time magazine.

"The official, a frequent participant in White House Situation Room meetings after Sept. 11 who has since left government, says a CIA counter-terrorism official twice said that a high-value prisoner or prisoners were being held and interrogated on the island," the magazine reported.

The Pentagon repeated earlier denials of U.S. military interrogations at the island. "There were no DOD detainees or interrogations there," Jeffrey Gordon, spokesman for the U.S. Department of Defense, said on Friday.

While the Island, in the middle of the Indian Ocean, is a British territory, it is dominated by a U.S. military base established during the Cold War, strategically placed within reach of the Gulf area and South Asia. Long-range U.S. military planes and naval ships are deployed there.

The United States has in the past given Britain assurances that terrorism suspects on two so-called "rendition" flights which landed on the island to refuel had not been taken to secret detention facilities there.

Washington has admitted to staging "renditions", in which suspects in President George W. Bush's war against terrorism have been captured in one country and flown to another for interrogation.

But it insists such movements was only took place after assurances that the detainees would be treated according to international law. Critics and some former detainees accuse the CIA of mistreating prisoners, but Bush says the United States does not use torture.

Britain, Washington's close ally in the wars in Iraq and Afghanistan, had long said it was not aware of its territory being used for renditions since Bush took office in 2001.

But British Foreign Secretary David Miliband apologized to parliament in February after it emerged that two U.S. planes carrying suspects on "rendition" flights had landed and refueled at the U.S. base on Diego Garcia in 2002 despite previous British government denials based on U.S. assurances.

Miliband said Washington told Britain that neither of the detainees was British. He said one was being held at the U.S. prison camp at Guantanamo Bay, Cuba, and the other had been released.

Time magazine also reported on its Web site, www.time.com, that terrorism suspects may have been held on ships.

"According to this single source, who requested anonymity because of the classified nature of the discussions, the U.S. may also have kept prisoners on ships within Diego Garcia's territorial waters," it reported.

Time said the identity of the prisoners was not made clear. (Reporting by Michelle Nichols, editing by Vicki Allen)

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