CAIRO (Reuters) - Defense Secretary Leon Panetta called on Egypt Tuesday to release a U.S.-Israeli dual national who was detained in June on charges of spying for Israel.

Panetta's visit to the Arab world's most populous country followed speculation by Egyptian and Israeli media over the possible release of Ilan Grapel.

Israel has denied Grapel is a spy.

"We have expressed concern about his treatment and have urged that ultimately he be released. And we raised that issue today ... in discussions," Panetta told reporters in Cairo.

"We're confident that ultimately the Egyptian government will deal with that fairly," he said, adding he was not involved in direct negotiations over Grapel.

Egyptian security also denied there were any negotiations over the release of the 27-year-old.

Before arriving in Egypt, Panetta said he hoped to "reaffirm our security relationship with Egypt" and that he encouraged Egypt's military rulers to move ahead with the election process.

Egypt's parliamentary polls will start on November 28, beginning the process of handing power to civilians after former President Hosni Mubarak was ousted on February 11 in a popular uprising.

Panetta also discussed regional security, including tensions between Egypt and Israel. Egypt became the first Arab state to sign a peace treaty with Israel in 1979 and has received billions of dollars in U.S. aid since then.

In September, Israel flew its ambassador to Egypt back home after protesters stormed the embassy building in anger over a border clash that killed several Egyptian guards in August.

The incident raised concerns about Cairo's future commitment to its long-standing peace deal with the Jewish state.

Panetta said he thanked Field Marshal Mohamed Hussein Tantawi, who heads the military council ruling Egypt, for moving quickly to help the besieged embassy.

(Reporting by David Alexander; Editing by Marwa Awad)