"About USD 800 million in military aid and equipment, or over one-third of the more than USD 2 billion in annual American security assistance to Pakistan, could be affected," the New York Times reported.
This aid includes about USD 300 million to reimburse Pakistan for some of the costs of deploying more than 100,000 soldiers along the Afghan border to combat terrorism, as well as hundreds of millions of dollars in training assistance and military hardware, the paper said quoting half a dozen Congressional, Pentagon and other administration officials.
The move illustrates the depth of the debate inside the Obama administration over how to change the behaviour of one of its key counter-terrorism partners, the NYT said.
The news of halting or withdrawal of aid comes days after US military chief Admiral Mike Mullen`s remarks linking Pakistan government to the murder of a journalist.
Some of the curtailed aid is equipment that the US wants to send but Pakistan now refuses to accept, like rifles, ammunition, body armour and bomb-disposal gear that were withdrawn or held up after Pakistan ordered more than 100 Army Special Forces trainers to leave the country in recent weeks.
Some is equipment, such as radios, night-vision goggles and helicopter spare parts, which cannot be set up, certified or used for training because Pakistan has denied visas to the American personnel needed to operate the equipment, two senior Pentagon officials said, the paper added.
"Some is assistance like the reimbursements for troop costs, which is being reviewed in light of questions about Pakistan`s commitment to carry out counter-terrorism operations," the NYT said.
"When it comes to our military aid... we are not prepared to continue providing that at the pace we were providing it unless and until we see certain steps taken," Secretary of State Hillary Clinton said last month.
American officials say they would probably resume equipment deliveries and aid if relations improve and Pakistan pursues terrorists more aggressively, the paper said, adding the cutoffs do not affect any immediate deliveries of military sales to Pakistan, like F-16 fighter jets, or nonmilitary aid.
While the American aid cutoff would probably have a small impact on the overall military budget, it would most directly affect the counterinsurgency campaign, it said.
While some senior administration officials believe that Pakistan will never be the kind of partner the US hoped for when President Obama entered office, others emphasize that the Washington cannot risk a full break in relations, it said.
But many of the recent aid curtailments are clearly intended to force the Pakistani military to make a difficult choice between backing the country that finances much of its operations and equipment, or continuing to provide secret support for the Taliban and other militants groups, it said.
After the killing of bin Laden by US commandos in a covert raid, Pakistan shut down the American programme to help train its paramilitary troops fighting Taliban and al-Qaeda in the lawless border regions near Afghanistan.
The decision to hold back much of the American military aid has not been made public by the Pakistani military or the civilian government. But it is well known at the top levels of the military, and a senior Pakistani official described it as an effort by the Americans to gain "leverage", the paper said.
Former Pakistani diplomat Maleeha Lodhi, who served twice as ambassador to the United States, said the Pentagon action was short-sighted, and was likely to produce greater distance between the two countries.
"It will be repeating a historic blunder and hurting itself in the bargain by using a blunt instrument of policy at a time when it needs Pakistan`s help to defeat Al Qaeda and make an honorable retreat from Afghanistan," the paper quoted Lodhi as saying of the US.
Within the Pakistani Army, the hold on American assistance would be viewed as "an unfriendly act and total disregard of the sacrifices made by the army," said Brig.
Javed Hussain, a retired special forces officer.