Rutte was to have inaugurated the scanner on the frontier with the Palestinian Islamist-ruled strip, but the ceremony was put off because of the row.
"Installation of the Dutch scanner, which would have been used to verify the contents of containers from Gaza destined for export, was postponed after the Netherlands made unexpected demands," the official told AFP yesterday, speaking on condition of anonymity.
"Technically, there is no problem about the scanner at the Kerem Shalom crossing through which goods originating in Gaza pass," the official said.
"These are political issues that need to be resolved at the highest level, which will delay the start-up of the scanner."
Media reports said the row meant the ceremony at the crossing originally due for yesterday, with Rutte present, was cancelled.
The focus of the dispute is exports from Gaza to the West Bank, which is controlled by the Palestinian Authority under president Mahmud Abbas.
Israel's defence ministry wants to isolate the two Palestinian regions, while Dutch officials had hoped the scanner might boost commerce between them, the media reports said.
"We welcome the bringing of scanners to make sure that at least we control the material that goes in and out of Gaza," Netanyahu's office quoted him as saying in response to a question from a Dutch journalist.
"It can facilitate right now the screening of goods that go out to the European markets. We want to make sure that goods that go out from there, from Gaza, do not reach the Palestinian Authority areas."
After one of its soldiers, Gilad Shalit, was captured in 2006 by Gaza-based militants, Israel imposed a blockade on the Palestinian enclave.
There was also a diplomatic spat yesterday in the Israeli-occupied West Bank, where Dutch Foreign Minister Frans Timmermans, travelling with Rutte, cancelled a planned event rather than accept an Israeli military escort, a Dutch foreign ministry official said.