A government official in New Delhi says the Indian diplomat who was arrested in New York on visa fraud charges had accused her housekeeper of blackmail over the summer.
Devyani Khobragade was strip-searched last week in a case that has caused a diplomatic firestorm between the United States and India.
The Indian diplomat was charged with visa fraud and underpaying her nanny, an Indian national.
India has been furious in its response to what it considers the degrading treatment of a senior diplomat by the United States, a country it sees as a close friend, and retaliated by removing security barriers at the US Embassy in New Delhi. The barriers would offer some protection against a suicide-bomb attack.
Prosecutors say Khobragade lied on a visa application about how much she paid her housekeeper, an Indian national. The maid allegedly received less than US$3 (NZ$3.7) per hour.
In a mark of how serious the dispute has become, Secretary of State John Kerry called India's national security adviser Wednesday (local time) and "expressed his regret" over the incident, according to the State Department.
And Indian officials announced they were transferring Khobragade to their country's mission to the United Nations. The move, if approved, would give her full immunity from other charges going forward.
Khobragade, 39, India's deputy consul general in New York, was dropping off one of her daughters at school last Thursday when agents of the US Diplomatic Security Service descended, handcuffing her.
Later, she was strip-searched and - she claims - cavity-searched by US marshals; the Marshals Service is charged with housing federal prisoners. Experts said that was unheard-of treatment for a diplomat arrested by a friendly country. (A spokeswoman for the agency says that Khobragade was merely strip-searched.)
US officials have maintained that as a consulate employee, Khobragade was entitled only to limited immunity, for acts related to her consular duties, rather than the full immunity accorded to other kinds of diplomats.
If found guilty of visa fraud and making false statements on a visa application, she could face 10 years in prison.
On Thursday, an official in India's External Affairs Ministry said Khobragade wrote to Indian authorities over the summer that the maid had disappeared and was trying to blackmail her. The official spoke on condition of anonymity because he is not authorised to speak publicly about this case.
While Kerry has "expressed regret" about Khobragade's case, a federal prosecutor has defended the arrest and strip-search, saying Khobragade was treated very well, even given coffee and offered food while detained.
US Attorney Preet Bharara, who made the highly unusual move of issuing a lengthy statement addressing the arrest and issues not in a criminal complaint, said that Khobragade was afforded courtesies most Americans wouldn't get - such as being allowed to make phone calls for two hours to arrange child care and sort out personal matters - after she was discretely arrested by US Department of State agents outside her children's Manhattan school.
Kerry, however, has made a call to Indian National Security Adviser Shivshankar Menon, aimed to defuse a diplomatic crisis sparked by the arrest.
"As a father of two daughters about the same age as Devyani Khobragade, the secretary empathises with the sensitivities we are hearing from India about the events that unfolded after Ms Khobragade's arrest," State Department spokeswoman Marie Harf said in a written statement.
"In his conversation with National Security Advisor Menon, (Secretary Kerry) expressed his regret, as well as his concern that we not allow this unfortunate public issue to hurt our close and vital relationship with India," Harf added.
An expression of regret, in the world of diplomacy, is generally viewed as something short of an outright apology.
Harf said Kerry had used the word "regret" in his conversation with Menon, but she declined to elaborate on whether this constituted an apology or to offer greater detail on their discussion.
White House spokesman Jay Carney said the administration is looking into the arrest "to ensure that all standard procedures were followed and that every opportunity for courtesy was extended."
The White House has told Indian officials it expects New Delhi will "fulfill all its obligations" for the safety and security of US diplomats in India, Carney said.
The US Justice Department confirmed that Khobragade was strip-searched. A senior Indian government source has also said the interrogation included a cavity search.
A spokeswoman for the US Marshals Service said Khobragade did not undergo a cavity search but did go through a strip search. Under the agency's regulations governing prisoner searches, a strip search can include a "visual inspection" of body cavities, including the nose, mouth, genitals and anus, without intrusion.
Khobragade told colleagues in an email of "repeated handcuffing, stripping and cavity searches, swabbing" and being detained in a holding cell with petty criminals, despite her "incessant assertions of immunity."
Now, India has appointed her to its permanent mission at the United Nations and Khobragade's attorney Daniel Arshack said that, in her new role, she would have diplomatic immunity from prosecution retroactively.
However, the State Department would have to sign off on a request to move her from the consulate to the UN mission, and no such request has been received, Harf told reporters. She said the US government notified India of the allegations against Khobragade in September.
The Indian housekeeper whose paycheck is at the center of the dispute, Sangeeta Richard, is said to be upset and disappointed the focus of the affair has shifted.
"The victim in this case is not a criminal defendant but the person who was denied her wages and underpaid for her work," said Dana Sussman, an attorney with the Safe Horizon Anti-Trafficking Program who is representing Richard.
Khobragade, who was released on US$250,000 bail after giving up her passport and pleading not guilty to the charges, faces a maximum of 15 years in jail if convicted on both counts.
India and the United States have become close trade and security partners, but they have not totally overcome a history of distrust.
"It is no longer about an individual, it is about our sense of self as a nation and our place in the world," Foreign Minister Salman Khurshid told parliament, whose usually fractious members showed rare unity on the issue.
Khurshid said work conditions of Indians employed in US consulates would be investigated to root out any violations of labour laws, adding that there would be a freeze on the duty-free import of alcohol and food for diplomatic staff.
In New Delhi, supporters of a right-wing opposition party held a small protest near the US Embassy. About 30 demonstrators, some wearing masks of President Barack Obama and sarongs made from the US flag, demanded an apology.
"It was very good that the government removed the barriers yesterday. Until the USA says sorry, we should not give any security at all to the Americans," said protester Gaurav Khattar, 33.
The Khobragade case is the latest concerning the Indian elite's alleged exploitation of their domestic workers, both at home and abroad.
Another official at India's consulate in New York was fined almost US$1.5 million last year for using her maid as forced labour. Last month, the wife of a member of parliament was arrested in Delhi for allegedly beating her maid to death.
India says Khobragade's former housekeeper left her employer a few months ago and demanded help to obtain permanent resident status in the United States.
One Indian government minister, Shashi Tharoor, has argued that it is not reasonable to expect diplomats from developing countries to pay the US minimum wage to domestic staff because the envoys themselves earn less than that.