The designated chief executive of Israeli tech firm NSO Group is resigning days after being announced, a source close to the company said Thursday, as Palestinian officials claimed its software hacked their phones.

Isaac Benbenisti was tapped last week to succeed founder and CEO Shalev Hulio, who was to have become global president and vice chairman of the board.

NSO's Pegasus software can switch on a phone's camera or microphone and harvest its data.

It was at the centre of a storm in July after a list of about 50,000 potential surveillance targets worldwide was leaked to the media.

The management shake-up at NSO comes after the United States on November 3 blacklisted the company for enabling "foreign governments to conduct transnational repression".

NSO as well as the Israeli company Candiru and firms based in Singapore and Russia were targeted for restrictions on US exports.

The source close to NSO who spoke to AFP on condition of anonymity said "because of the crisis with the US... Shalev decided that he still will sit on the chair of the CEO."

NSO says its Pegasus software helps fight crime, but investigators have found it on the phones of journalists and dissidents.

On Thursday Ahmed al-Deek, a senior official in the Palestinian foreign ministry, said Pegasus was found on phones of three of his colleagues.

"We have confirmed by experts and specialised companies that Pegasus has been found on phones of three officials at the foreign affairs ministry," he told AFP.

The Palestinian ministry of foreign affairs and expatriates said it "condemns in the strongest terms" the hacking of Palestinians' phones, calling it a "crime that must be held accountable".

The allegation follows a report on Monday by a European rights group saying Pegasus was used to hack phones of the staff of Palestinian civil society groups that Israel has deemed terrorist organisations.

The groups deny the charge.

Eitay Mack, a human rights lawyer specialising in Israeli defence exports, said Benbenisti's decision to resign "proves that the US Department of Commerce's decision is making waves and seeping through.

"The big question (is) what will the company's international investors do now?" he said.

Israel has pushed back against the US blacklisting of NSO.

Pegasus can only be sold to states, and the sales must be approved by the defence ministry.

Speaking to reporters on Saturday, Foreign Minister Yair Lapid stressed that NSO was a "private company" that followed Israel's defence export guidelines.

"I don't think there's another country in the world which has such strict rules according to cyber warfare and that is imposing those rules more than Israel."