Foreign Affairs Minister Micheál Martin made the claim as he ordered the expulsion of an Israeli embassy diplomat yesterday.
The Government also concluded the conduct of Israeli authorities had been “profoundly disturbing”.
Mr Martin briefed the Cabinet yesterday about the joint Garda and passport office investigation.
The inquiry into the use of eight forged Irish passports – one belonging to a minor – in the killing of Mahmoud al Mabhouh in Dubai concluded the level of sophistication in the making of the fake documents pointed to the involvement of a foreign state agency or a well-resourced criminal group.
The Israeli embassy refused to discuss the accusations but confirmed its ambassador, Dr Zion Evrony, was summoned to Iveagh House yesterday and told of the order to remove one of his staff.
A spokesman said: “Israel regrets this decision. We believe that it does not reflect the overall positive relations which exist between Ireland and Israel.”
Mr Martin pointed to the use of forged Australian and British passports used in the January 19 killing and that both countries, after their own investigations, had expelled Israeli officials.
While Ireland found no extra evidence linking the Irish passports to Israel, the Government and its investigators, after close contact with other countries, had come to the “inescapable conclusion” that Israel was to blame.
Speaking to RTÉ radio, the minister added: “We haven’t reached conclusive final evidence in how they actually did it...
“It could have happened probably in this country. Some of the Irish citizens involved would have travelled widely in some instances and in some, not so widely.”
The expelled Israeli embassy official was not suspected of any wrongdoing, said Mr Martin.
He added: “In being obliged to leave their post prematurely, the official concerned is a victim of the actions of the state they represent.”
Reacting to the development, the Ireland Palestine Solidarity Campaign welcomed the expulsion but called for the ambassador to be kicked out.