"We are rejecting an international commission. We are discussing with the Obama administration a way in which our inquiry will take place," Ambassador Michael Oren said on "Fox News Sunday."
UN Secretary-General Ban Ki-moon has proposed a multinational investigation of the raid, an Israeli official said earlier Sunday.
Ban has suggested establishing a panel that would be headed by former New Zealand prime minister Geoffrey Palmer and include representatives from Israel, the United States and Turkey, under whose flag the ship sailed, said the official from Prime Minister Benjamin Netanyahu's office.
Netanyahu discussed the proposal with Ban on Saturday and planned to convene senior cabinet ministers on Sunday to decide whether Israel would take part, said the official, who spoke on condition of anonymity.
But Oren told Fox: "Israel is a democratic nation. Israel has the ability and the right to investigate itself, not to be investigated by any international board."
Israeli leaders have spoken publicly about having foreign observers for an Israeli investigation into the interception of the Turkish-flagged Mavi Marmara last Monday.
Ban also discussed with Turkish Prime Minister Tayyip Erodogan "options for moving forward with the investigation called for by the Security Council," the United Nations said on its website, referring to the council's call for an impartial inquiry.
Israel's navy boarded another ship carrying aid to Gaza on Saturday. Its interception of the MV Rachel Corrie ended without violence following diplomatic efforts to avoid bloodshed.
