Quoting a former senior American official, Time magazine said, the United States imprisoned and interrogated one or more terror suspects on Diego Garcia in 2002 and possibly in 2003.
The official, who was a frequent participant to the White House situation room meetings after September 11 according to the magazine, says a CIA counter-terrorism official twice said that a high-value prisoner or prisoners were being held and interrogated on the island.
According to the official, the CIA surprised attendees by volunteering the information, apparently to demonstrate that the agency was doing its best to obtain valuable intelligence.
The American official, the only source whom the magazine didn't identify, also disclosed that the US might have kept prisoners on ships within Diego Garcia's territorial waters, a contention the Americans have long denied.
Time further said that it discussed the allegation with Richard Clarke, who served as a Special Advisor to President George W Bush on the National Security Council dealing with counter-terrorism until 2003.
"In my presence, in the White House, the possibility of using Diego Garcia for detaining high value targets was discussed," said Clarke, who is not the source for the story.
Clarke, who did not witness the final resolution of the issue adds, "Given everything that we know about the administration's approach to the law on these matters, I find the report entirely credible."
Diego Garcia is a tiny island, but its use by the US as a detention or interrogation site has global significance, the magazine said.