The White House appears ready to engage Egypt's Muslim Brotherhood, a political group that has long been considered hostile to the United States.
The New York Times on Tuesday quoted an Obama administration official who said dealing with the Brotherhood is a political reality.
The historic shift in U.S. foreign policy comes as the Islamist group firms up its majority in Egypt's two-day parliamentary elections.
Brotherhood leaders have threatened to undo the country's peace agreement with Israel and vowed not to recognize the Jewish state.
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Still, the Obama administration said the group has been "very specific about conveying a moderate message - on regional security and domestic issues."
However, Middle East analyst Walid Phares warns once the Muslim Brotherhood establishes control of a new government, Egyptians may find it difficult to reverse course.
"Their plan is basically to move into government, into those ministries, into bureaucracies, and eventually into the armed forces and seize power as much as they can," he said.
"The Muslim Brotherhood's aim, final goal is to establish an Islamic state like Iran or like Sudan -- or ultimately like the Taliban," Phares added.
Despite the administration's shift in policy, new congressional restrictions could still force cuts to the $1.3 billion in American military aid sent to Egypt.