Ehud Olmert's political opponents are demanding his resignation saying, new allegations that the Israeli prime minister illegally accepted hundreds of thousands of dollars from a US citizen render him unfit for the country's top job.

Olmert has said he would resign only if formally indicted in the case, in which he is alleged to have broken campaign funding laws before becoming prime minister in January 2006.

He denied any wrongdoing in the affair.

But some Israeli lawmakers critical of Olmert say the new police investigation is reason enough for him to step down.

Arieh Eldad of the hardline National Union party said on Friday that Olmert's legal troubles are diverting his attention from running the country, and "a state like Israel needs a full-time prime minister."