Student Chelsea gets lesson in diplomacy.
The man who first exposed the Monica Lewinsky affair quoted a senior Israeli official as saying: "It was very disconcerting.
"It was `Chelsea this, Chelsea that'. What could a young girl possibly know about the situation?"
Drudge said he was approached by the official who gave him notes and photographs that revealed university student Chelsea's involvement.
One photograph, taken at the White House on the day peace talks collapsed, shows the president's daughter holding a folder while seated between Secretary of State Ms Madeleine Albright, National Security Adviser Mr Sandy Berger, US mediator Mr Dennis Ross and Mr Bruce Riedel, of the National Security Council.
"We were quite surprised by all of this," a member of the negotiating team told Drudge. "Bill Clinton is not only giving his young Miss a front row seat, but also a seat at the table!"
A White House source strongly denied Chelsea played any role in the Middle East summit.
When pressed for comment on photographs and documents that place Chelsea at the centre of action, the adviser conceded the "first daughter" may have been a "casual observer".
"She is very interested in politics," said the Clinton aide.
Chelsea is filling in more and more for her mother Hillary, who is spending most of her time in New York campaigning for a senate seat.
Chelsea, who is delaying her return for a final year at Stanford University in California, accompanied her father to the G8 summit in Japan.
First Lady Hillary may need Chelsea's campaigning skills in New York - she is trailing her Republican senate rival Mr Rick Lazio in the latest poll.
He has an eight point lead - 50 per cent to 42 per cent.